Morning Notes – Thursday May 30, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 12:30 PM on Wednesday
  • The odds are for an up to sideways day with elevated volatility – watch for break below 2785.00 for change of fortune
  • Key economic data due:
    • Prelim GDP (3.1% vs. 3.1% est.; prev. 3.2%) at 8:30 AM
    • Prelim GDP Price Index (0.8% vs. 0.9% est.; prev. 0.9%) at 8:30 AM
    • Prelim Wholesale Inventories (0.7% vs. 0.2% est.; prev. -0.1%) at 8:30 AM
    • Good Trade Balance (-72.1B vs. -72.0B est.; prev. -71.9B) at 8:30 AM
    • Unemployment Claims (215K vs. 216K est.; prev. 212K ) at 8:30 AM
    • Pending Home Sales (est. 0.9% ; prev. 3.8% ) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai and Seoul were up
  • European markets are mostly higher – Italy is lower and Switzerland is closed
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Silver
    • Sugar (Unch.)
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Gold
    • Copper
    • Platinum
    • Palladium
  • Bonds
    • 10-yrs yield is at 2.248%, up from May 29 close of 2.236%;
    • 30-years is at 2.673%, unchanged
    • 2-years yield is at 2.101%, down from 2.117%
    • The 10-Year-&-2-Year spread is at 0.149, up from 0.119

Key Levels:

  • Critical support levels for S&P 500 are 2768.85, 2766.06 and 2747.61
  • Critical resistance levels for S&P 500 are 2787.19, 2792.03 and 2802.06
  • Key levels for eMini futures: break above 2793.00, the high of 3:30 AM and break below 2785.00, the low of 8:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2782.75 and the index closed at 2783.02 – a spread of about -0.25 points; futures closed at 2780.00 for the day; the fair value is +2.75
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +10.25; Dow by +60 and NASDAQ by +30.75

Directional Bias Before Open

  • Weekly: Uptrend under pressure
  • Daily: Uptrend under pressure
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: 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 red hammer like candle that gapped won at the open; almost no upper shadow and a lower more than twice of the real body
    • %K is below %D bouncing off 0
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9; nearing 30
    • 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 breached
  • Below 20-day EMA; below 50-day EMA and 100-DAY SMA; at/above 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; the 61.8% extension target is near 2745.00
    • RSI-21 has risen to near 50 after moving around 20- for sometime
    • %K is crossing below %D from near 80 at 4:00 AM
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving down since 9:30 AM on May 28; 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 near 2768.00 is achieved
    • RSI-21 has risen to above 50 after making a Bullish Divergence at 11:30 AM on May 29
    • %K crossed above %D from below 30; nearing 50
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 10:00 PM
  • The Bollinger Band is relatively narrow since 10:00 PM
  • Stochastic (9, 1, 3): %K crossed above %D at 8:00 AM from below 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, May 29 in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume. S&P 500, NASDAQ Composite and Russell 2000 traded in higher volume. Major indices gapped down at the open breaking significant support levels.

From Briefing.com:

The S&P 500 was down as much as 1.3% on Wednesday amid trade and growth concerns, while the advance in U.S. Treasuries helped widen a key inversion within the yield curve. A rebound in the last hour of action, however, helped the benchmark index finish lower by 0.7% and reclaim its 200-day moving average (2776) after falling below the key technical level during the day.

The Dow Jones Industrial Average (-0.9%), the Nasdaq Composite (-0.8%), and the Russell 2000 (-0.9%) also finished off their session lows.

No S&P 500 sector finished higher, but the materials (-0.1%) and financials (-0.1%) sectors did finish just below their unchanged marks. The utilities (-1.3%) and real estate (-1.2%) sectors underperformed.

[…]

At one point during the day, the 3-month yield was 14 basis points higher than the 10-yr yield, which was its biggest difference since the financial crisis and helped feed into the persisting growth concerns. This term spread, according to research from the Federal Reserve Bank of San Francisco, is the most reliable predictor of a recession among the different term spreads.

Demand for U.S. Treasuries did lose traction during the afternoon, though, bringing yields slightly higher from session lows. The 2-yr yield finished four basis points lower at 2.08%, and the 10-yr yield finished three basis points lower at 2.23%. The U.S. Dollar Index increased 0.2% to 98.16. WTI crude declined 0.5% to $58.84/bbl.

[…]

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