Morning Notes – Thursday May 23, 2019

Directional Bias For The Day:

  • S&P Futures are lower; mostly moving down since 2:00 PM on Tuesday;  fresh leg down since 2:30 PM on Wednesday
  • The odds are for a down day with elevated volatility – watch for break above 2841.00 for change of fortune
  • Trade news influencing the sentiments; risk-off sentiments
  • Key economic data due:
    • Unemployment Claims (211K vs. 215K est.; prev. 212K) at 8:30 AM
    • Flash Manufacturing PMI (est. 53.;; prev. 53.0) at 9:45 AM
    • Flash Services PMI (est. 53.6; prev. 53.0) at 9:45 AM
    • New Home Sales ( est. 678K; prev. 692K) at 10:00 AM

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Palladium
    • Cotton
    • Crude Oil
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.361%, down from May 21 close of 2.393%;
    • 30-years is at 2.785%, down from 2.818%
    • 2-years yield is at 2.192%, down from 2.225%
    • The 10-Year-&-2-Year spread is at 0.169, up from 0.168

Key Levels:

  • Critical support levels for S&P 500 are 2831.29, 2820.08 and 2815.08
  • Critical resistance levels for S&P 500 are 2851.11, 286318 and 2868.69
  • Key levels for eMini futures: break above 2841.00, the high of 3:30 AM and break below 2825.25, the low of 6:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2857.50 and the index closed at 2856.27 – a spread of about +1.25 points; futures closed at 2857.50 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -23.25; Dow by -230 and NASDAQ by -82.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Side-Down
  • 30-Min: Down
  • 15-Min: 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 open 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 small red doji candle will small upper shadow and smaller lower shadow
    • %K is above %D but turning down; just above 50
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9
    • RSI-9 is turning down below 50 but 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 down since 12:00 PM on May 16;
    • RSI-9 is falling since 12:00 PM on Tuesday from above 60; below 30
    • %K is crossing above %D near 10
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Mostly moving down since 2:00 PM on Wednesday; made a double bottom on Monday and broke above the intermediate and achieved the 61.8% target around 2869.00
    • RSI-21 is moving down since 2:00 PM on May 21; bouncing from a low of 24 to just above 30
    • %K is crossing above %D above 50
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 7:30 AM on Wednesday
  • The Bollinger Band was relatively narrow from 1:30 PM to 2:00 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D near 80
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Wednesday, May 22 in mixed volume. Dow Jones Industrial Average and NASDAQ Composite traded in lower volume. S&P 500, Russell 200 and Dow Jones Transportation Average traded in higher volume. The day’s range was small and most made small red doji like candles. Russell 2000 and DJT made relatively large red candle.

From Briefing.com:

The stock market wavered with modest losses on Wednesday, leaving the S&P 500 down 0.3%, amid persisting trade uncertainty. The prevalence, and volatile nature, of trade headlines that have no clear end-date helped curb some of yesterday’s trade-related enthusiasm.

The Dow Jones Industrial Average lost 0.4%, the Nasdaq Composite lost 0.5%, and the Russell 2000 lost 0.9%.

Reports that the U.S. is considering blacklisting several other Chinese firms put a damper on Apple (AAPL 182.78, -3.82, -2.1%) and many of the stocks within the Philadelphia Semiconductor Index (-2.1%).

[…]

All of the S&P 500 cyclical sectors finished lower. The energy sector (-1.6%) led the decline amid lower oil prices ($61.40/bbl, -$1.67, -2.6%), which were pressured by the trade uncertainty and some bearish inventory data.

This uncertainty also fostered some defensive positioning in U.S. Treasuries and in the S&P 500 utilities (+0.8%), health care (+0.6%), consumer staples (+0.6%) and real estate (+0.4%) sectors.

The 2-yr yield declined two basis points to 2.22%, and the 10-yr yield declined three basis points to 2.39%. The U.S. Dollar Index finished little changed at 98.09.

[…]

• The Minutes from the May FOMC meeting showed that policymakers are comfortable with the current fed funds rate range while “a number of participants” saw a moderation in risk and uncertainties surrounding their outlooks for the year.
o The key takeaway is that the stock market has a reasonable assurance to think policy rates are going to remain quite low on a real and nominal basis. Low rates are supportive for risk assets like stocks.

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