Morning Notes – Friday May 31, 2019

Directional Bias For The Day:

  • S&P Futures are lower; fresh leg down since 7:30 PM on Thursday
  • The odds are for a down day with good chance of a bounce from pre-open levels and elevated volatility – watch for break below 2776.00 for change of fortune
  • Key economic data due:
    • Core PCE (0.2% vs. 0.2% est.; prev. 0.0%) at 8:30 AM
    • Personal Spending (0.3% vs. 0.2% est.; prev. 0.9%) at 8:30 AM
    • Personal Income (0.5% vs. 0.3% est.; prev. 0.1%) at 8:30 AM
    • Chicago PMI ( est. 55.1; prev. 2.6) at 9:45 AM
    • Revised UoM Consumer Sentiment ( est. 102.0; prev. 102.4) at 10:00 AM
    • Revised UoM Inflation Expectation ( prev. 2.8% ) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly lower – Sydney and Seoul were up
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Cocoa
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.160%, down from May 30 close of 2.227%;
    • 30-years is at 2.600%, down from 2.654%
    • 2-years yield is at 2.016%, down from 2.061%
    • The 10-Year-&-2-Year spread is at 0.148, down from 0.166

Key Levels:

  • Critical support levels for S&P 500 are 2747.61, 2744.13 and 2731.19
  • Critical resistance levels for S&P 500 are 2766.06, 2776.74 and 2791.10
  • Key levels for eMini futures: break above 2763.50, the low of 8:00 PM on May 30; break above 2776.00, the high of 11:30 PM; and break below 2753.75, the low of 6:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2789.25 and the index closed at 2788.86 – a spread of about -0.50 points; futures closed at 2790.50 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -32.50; Dow by -266 and NASDAQ by -101.00

Directional Bias Before Open

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

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 harami doji candle with small upper and lower shadows
    • %K is crossing above %D from below 10
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9; nearing 30
    • RSI-9 is turning up from near 30 and a potential Bullish Divergence is in the making; still below its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is broken
  • 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 is declining since 8:00 AM on May 30 is making Bullish Divergences since 6:00 PM;
    • %K is crisscrossing %D down from above 90
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
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 on May 28; 261.8% extension target of bigger pattern is near 2710.00; fresh down leg since 10:30 AM on May 30
    • RSI-21 is declining since 9:30 AM on May 30; near 30 from near 60
    • %K crossed above %D from below 20 at 6:00 AM
  • Below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 2:45 PM
  • The Bollinger Band is relatively narrow from 0:30 AM tp 2:45 AM; expanding since with price walking down the lower bound
  • Stochastic (9, 1, 3): %K is above %D since 6:00 AM from below 20
  • Bias: Down

Previous Session

Major U.S. indices closed mostly higher on Thursday, May 30 in lower volume. Dow Jones Transportation Average and Russell 2000 closed down. Major indices closed below the open and did not close the own gap created on Wednesday. Most had doji like candle formation.

From Briefing.com:

The S&P 500 advanced as much as 0.6% on Thursday, nearly touching the 2800 level in a rebound from short-term oversold conditions. A lack of conviction, however, knocked the benchmark index off its strong start and contributed to some sideways trading for the rest of the session. The S&P 500 finished higher by 0.2% after finding some support at its 200-day moving average (2776).

The Dow Jones Industrial Average increased 0.2%, and the Nasdaq Composite increased 0.3%. The Russell 2000 decreased 0.3%.

The S&P 500 real estate (+0.7%), information technology (+0.6%), health care (+0.5%), and consumer discretionary (+0.5%) sectors outperformed the broader market. The Philadelphia Semiconductor Index (+0.7%) advanced for the second straight day.

[…]

The 2-yr yield and the 10-yr yield were both up five basis points in overnight action, as Treasuries cooled off from their lengthy advance. Buying interest, however, picked up during the session, leaving the 2-yr yield down two basis points to 2.06% and the 10-yr yield down one basis point to 2.23%. The U.S. Dollar Index finished unchanged at 98.15.

[…]

• The second estimate for Q1 GDP showed a slight downward revision to 3.1% (Briefing.com consensus 3.1%). The GDP Price Deflator was revised to 0.8% (Briefing.com consensus 0.9%) from 0.9%.
o The key takeaway from the report is that it is backward looking (we’re nearly two months into the second quarter), which diminishes its market-moving impact. Still, it reinforces the notion that first quarter growth was better than most thought it would be before the quarter started.
• Initial claims for the week ending May 25 increased by 3,000 to 215,000 (Briefing.com consensus 217,000) while continuing claims for the week ending May 18 decreased by 26,000 to 1.657 million.
o The key takeaway from the report is that the initial claims data remains consistent with tight labor market conditions.
• The advance international trade in goods deficit for April widened to $72.1 billion (Briefing.com consensus -$72.0 billion) from $71.9 billion in March. Exports were $5.9 billion less than March exports while imports were $5.6 billion less than March imports.
• Pending Home Sales decreased 1.5% in April (Briefing.com consensus +1.0%). Today’s reading follows a revised increase of 3.9% in March (from 3.8%).

[…]

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