Morning Notes – Wednesday May 22, 2019

Directional Bias For The Day:

  • S&P Futures are lower; mostly moving down since 2:00 PM on Tuesday;  fresh leg down since 6:30 AM
  • The odds are for a down to sideways day with elevated volatility – watch for break above 2865.75 for change of fortune
  • Trade news influencing the sentiments; risk-off sentiments
  • Key economic data due:
    • FOMC Meeting Minutes at 2:00 PM

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Singapore were down
  • European markets are mostly lower – U.K. is up
  • Currencies:
    Up Down
    • EUR/USD
    • AUD/USD
    • USD/INR
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Copper
    • Sugar
    • Crude Oil
    • NatGas
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.407%, down from May 20 close of 2.416%;
    • 30-years is at 2.829%, down from 2.842%
    • 2-years yield is at 2.229%, down from 2.254%
    • The 10-Year-&-2-Year spread is at 0.178, up from 0.172

Key Levels:

  • Critical support levels for S&P 500 are 2854.02, 2842.06 and 2831.29
  • Critical resistance levels for S&P 500 are 2863.37, 2868.69 and 2875.28
  • Key levels for eMini futures: break above 2857.50, the low of 4:00 AM and break below 2851.25, the low of 8:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 2866.25 and the index closed at 2864.36 – a spread of about +2.00 points; futures closed at 2866.00 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -12.25; Dow by -93 and NASDAQ by -50.25

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Side
  • 30-Min: Side-Down
  • 15-Min: Side-Down
  • 6-Min: Down

The trend and patterns on various time frames for S&P 500:

Monthly
  • Under Pressure
  • March 2019 was a green spinning top candle with lower shadow larger than the upper shadow
  • Third up month in a row
  • Sequence of higher highs and higher lows since February 2016 is broken
Weekly:
  • The week ending on May 17 was a green spinning candle that gapped down at the opne with small real body and almost equal sized upper and lower shadows;
    • Stochastics (9,1, 3): %K is below %D and nearing 30
    • RSI (9) has fallen below 50; made a Bearish Divergence vis-à-vis October 2018 high when the RSI was above 75 and January 2018 high when it was above 90
    • The index has broken above the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was down -21.87 or -0.8% and 5-week ATR is 66.85
  • Last week’s pivot point=2851.04, R1=2900.64, R2=2941.76; S1=2809.92, S2=2760.32; S1 pivot level was breached
  • A down week; third in last five weeks and fourth in last ten weeks
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018, when a lower swing low of 2346,58; since then the high of 2815.15 is breached but the all time high is not
  • Above 10-week EMA and 39-week SMA; above 89-week SMA
  • Uptrend
Daily
  • A relatively small green candle that gapped up at the open with small upper and almost no lower shadows
    • %K crossed above %D near 70
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9
    • RSI-9 is turning up and is above its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is in danger of breaking; break below 2785.02 will do it
  • Below 20-day EMA; at/above 50-day EMA, above 100-DAY SMA and 200-day SMA
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving sideways since 10:00 AM on May 21; declined from a high of 2894.00 at 12:00 PM on May 16 after rising since making a low of 2799.75 at 6:00 PM on May 13; broke above a downtrend line from the high of 2949.50 made at 4:00 PM on May 3 but below the trendline from all time high
    • RSI-9 is falling since 12:00 PM on Tuesday from above 60; near 40
    • %K is below %D and below 20
  • Below EMA10 of EMA50, which is at 20-bar EMA
  • Bias: Side
30-Minute (e-mini future)
  • Mostly moving sideways since 3:30 PM on Monday after making a double bottom; broke above the intermediate high at 9:30 PM; near the 61.8% target around 2869.00 and the  100% extension target is near 2877.00
    • RSI-21 is moving down since 5:00 AM from above 50 to below 40
    • %K is crossing above %D from below 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 3:30 PM on Tuesday
  • The Bollinger Band was relatively narrow from 3:30 PM to 7:00 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D near 20
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Tuesday, May 21 in mostly lower volume. Dow Jones Transportation Average traded in higher volume. Major indices gapped up at the open and then stayed up for the rest of the day leaving the small doji like candle formed on the Monday as a breakaway island.

From Briefing.com:

The S&P 500 rebounded 0.9% on Tuesday after the U.S. Department of Commerce granted Huawei a 90-day license to work with U.S. companies so it can service existing networks and mobile devices.

Like the S&P 500, the Dow Jones Industrial Average (+0.8%) and the Russell 2000 (+1.3%) recouped all of their losses from Monday. The tech-sensitive Nasdaq Composite (+1.1%) recouped most of its losses.

[…]

The trade-sensitive S&P 500 materials (+1.5%), information technology (+1.2%), and industrials (+1.2%) sectors outperformed the broader market. The consumer staples sector (-0.3%) was the lone sector to finish lower.

The Philadelphia Semiconductor Index advanced 2.1%, although it did drop 4.0% on Monday.

[…]

Earnings reports were retail-heavy on Tuesday. Home Depot (HD 191.45, +0.50, +0.3%) beat earnings estimates and issued upside full-year revenue guidance, but same store sales came up short of estimates. TJX Companies (TJX 53.26, +0.29, +0.6%) and AutoZone (AZO 1032.25, +54.42, +5.6%) advanced following their results, while Kohl’s (KSS 55.15, -7.76) fell 12.3% after disappointing investors.

[…]

U.S. Treasuries declined modestly, pushing yields slightly higher. The 2-yr yield increased two basis points to 2.24%, and the 10-yr yield increased one basis point to 2.43%. The U.S. Dollar Index increased 0.1% to 98.05. WTI crude declined 0.4% to $63.07/bbl.

[…]

• Existing home sales decreased 0.4% month-over-month in April to a seasonally-adjusted annual rate of 5.19 million (Briefing.com consensus 5.35 million) from an unrevised 5.21 million in March. Total sales were 4.4% lower than the same period a year ago.
o The key takeaway from the report is that overall sales activity remained light despite a drop in mortgage rates and a pickup in income, demonstrating that limited inventory and relatively high prices continue to impede existing home sales.

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