Morning Notes – Wednesday May 29, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving down since 9:30 PM on Tuesday; moving sideway since 2:30 AM
  • The odds are for a down day with elevated volatility – watch for break above 2800.00 for change of fortune
  • Trade news influencing the sentiments; risk-off sentiments
  • Key economic data due:
    • Richmond Fed Manufacturing Index (est. 6; prev. 3) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly lower – Shanghai was up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • AUD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
  • Bonds
    • 10-yrs yield is at 2.229%, down from May 28 close of 2.268%;
    • 30-years is at 2.085%, down from 2.115%
    • 2-years yield is at 2.192%, down from 2.225%
    • The 10-Year-&-2-Year spread is at 0.144, down from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2787.22, 2785.02 and 2773.82
  • Critical resistance levels for S&P 500 are 2798.77, 280143 and 2812.11
  • Key levels for eMini futures: break above 2792.25, the high of 7:00 AM and break above 2800.00, the high of 1:30 AM; and break below 2782.00, the low of 5:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 2801.25 and the index closed at 2802.39 – a spread of about -1.00 points; futures closed at 2805.00 for the day; the fair value is -3.75
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -19.25; Dow by -195 and NASDAQ by -64.00

Directional Bias Before Open

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

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 24 was a red 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 below 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 -33.47 or -1.2% and 5-week ATR is 63.39
  • Last week’s pivot point=2833.48, R1=2861.46, R2=2896.87; S1=2798.07, S2=2770.09; S1 pivot level was breached
  • A down week; third in last five weeks and fifth 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 under pressure
Daily
  • A relatively large red bearish engulfing type candle will small upper shadow and smaller lower shadow
    • %K is below %D nearing 0
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9
    • RSI-9 is below 50 and crossing below 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; below 50-day EMA, above 100-DAY SMA and 200-day SMA; 100-day SMA crossed above 200-day SMA for the first time since January 15
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving down since 12:00 PM on May 16; broke below a descending triangle at 2:00 PM on May 28
    • RSI-21 is moving around 20- since 2:00 PM on May 28
    • %K is crisscrossing %D near 20 since 2:00 PM on May 28
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving down since 9:30 PM on May 30; broke below a horizontal trading range at 2:00 PM and then a support level at 3:30 PM; 261.8% extension target of first pattern is achieved; the 100% extension target of second pattern is near 2768.00
    • RSI-21 is below 20 since 2:00 PM on May 28; rising after declining below 30
    • %K is below %D and below 50 after going above 80 at 6:30 AM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 7:00 AM after mostly moving down since 4:00 PM
  • The Bollinger Band was relatively narrow since 7:00 AM
  • Stochastic (9, 1, 3): %K crossed above %D at 8:30 AM but is turning down; below 20
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Tuesday, May 28 in mixed volume. Dow Jones Industrial Average, S&P 500, and Dow Jones Transportation Average traded in higher volume. NASDAQ Composite and Russell 2000 traded in lower volume. Major indices are at significant support levels. If the levels break there is a potential for deep decline.

From Briefing.com:

The S&P 500 lost 0.8% on Tuesday, while U.S. Treasuries rallied, as investors continued to show little enthusiasm for risk assets. Tuesday’s decline wiped out an early gain for the benchmark index and sent it back near the 2800 level as losses accelerated into the close.

The Dow Jones Industrial Average (-0.9%), the Nasdaq Composite (-0.4%), and the Russell 2000 (-0.7%) also gave up early gains and finished near their session lows.

[…]

The S&P 500 consumer staples (-1.8%), utilities (-1.6%), and health care (-1.4%) sectors led the market lower. The Dow Jones Transportation Average (-1.3%) was another laggard, as investors remained concerned about a protracted trade war with China. The communication services sector (+0.2%) was the lone sector to finish higher.

Demand for U.S. Treasuries remained strong, sending yields even lower, amid the trade uncertainty and negative disposition in equities. The 2-yr yield declined four basis points to 2.12%, and the 10-yr yield declined six basis points to 2.27% — eight basis points below the yield on the 3-month bill. The U.S. Dollar Index advanced 0.3% to 97.93. WTI crude rose 0.8% to $59.11/bbl.

[…]

• The Conference Board’s Consumer Confidence Index increased to 134.1 in May (Briefing.com consensus 130.0) from 129.2 in April. The May reading is the highest level for the index since November 2018.
o The key takeaway from the report is that it shows consumer confidence has not been impacted yet by the increased trade tension between the U.S. and China, which includes an escalation in tariff rates on Chinese imports that could ultimately be passed along to the consumer.
• The FHFA Housing Price Index for March increased 0.1% (Briefing.com consensus 0.3%) following a revised increase of 0.4% in February (from 0.3%).
• The S&P Case-Shiller Home Price Index for March increased 2.7% (Briefing.com consensus 2.9%) following a 3.0% increase in February.
Looking ahead, investors will receive the weekly MBA Mortgage Applications Index on Wednesday.

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