Morning Notes – Tuesday June 4, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 3:30 PM on Monday; new leg up since 2:30 AM; broke above double bottom pattern
  • The odds are for an up day with elevated volatility – watch for break below 2759.00 for change of fortune
  • No key economic data due:

Markets Around The World

  • Markets in the East closed mostly down – Sydney and Singapore were up
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • USD/INR
    • EUR/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • NatGas
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.125%, up from June 3 close of 2.081%;
    • 30-years is at 2.576%, up from 2.548%
    • 2-years yield is at 1.904%, up from 1.832%
    • The 10-Year-&-2-Year spread is at 0.221, down from 0.249

Key Levels:

  • Critical support levels for S&P 500 are 2728.81, 2723.02 and 2718.05
  • Critical resistance levels for S&P 500 are 2763.07, 2768.80 and 2776.74
  • Key levels for eMini futures: break above 2769.50, the high of 11:30 AM on June 3 and break below 2759.00, the low of 7:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (June contract) closed at 2743.75 and the index closed at 2744.45 – a spread of about -0.75 points; futures closed at 2749.50 for the day; the fair value is -5.75
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +19.00; Dow by +168 and NASDAQ by +53.25

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • May 2019 was a large Bearish Engulfing candle that closed below the real body of April and March and well into March’s lower shadow; April 2019 was a green candle with almost no upper and lower shadows;
  • Third up month in a row
  • Sequence of higher highs and higher lows since February 2016 is broken in December since then a new high has been made in May 2019
Weekly:
  • The week ending on May 31 was a large red candle with small upper shadow and almost no lower shadow;
    • Stochastics (9,1, 3): %K is below %D and near 0; %D made Bearish Divergence during the week of April 29
    • RSI (9) has fallen below 40; 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 -74.00 or -2.6% and 5-week ATR is 89.99
  • Last week’s pivot point=2781.03, R1=2811.54, R2=2871.02; S1=2721.55, S2=2691.04; S1/S2 pivot levels were breached
  • A down week; fourth 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
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • Uptrend under pressure
Daily
  • A small spinning top red candle with equal sized upper and lower shadows
    • %K is crossing above %D from below 10
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9; below 20
    • RSI-9 is still pointing down and is near 30; below its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is broken
  • Below 20-day EMA, 50-day EMA, 100-DAY SMA and 200-day SMA; 100-day SMA crossed is above 200-day SMA after for the first time since January 15 on May 22
  • Uptrend under pressure
2-Hour (e-mini future)
  • Rising after the gap down weekly open;
    • RSI-21 is rising since 2:00 AM on Monday after making a Bullish Divergence
    • %K is crisscrossing %D higher since 2:00 AM on Monday; above 90; Bullish Divergence
  • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving down since 9:30 AM on May 28 in steps;
  • Last leg is up since 3:30 PM on Monday after making a double bottom; a break above 2763.75 will complete the pattern; the 50% extension target is near 2779.00, 61.8% extension near 2783.00 and 100% extension target near 2795.00
    • RSI-21 is rising since 3:00 PM on Monday from near 40; above 50
    • %K is below %D since 6:00 AM after reaching 90
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to up since 11:00 PM on Sunday
  • The Bollinger Band was narrow from 10:00 PM on Monday to 3:00 AM; expanding since with price walking up the upper band since 3:00 AM
  • Stochastic (9, 1, 3): %K is below %D since 6:30 AM from above 90 after making a Bearish Divergence
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Monday, June 3 in mostly higher volume. S&P 500, NASDAQ Composite and Wilshire 5000 Total Market Index closed lower and others were up. Dow Jones Transportation Average traded in lower volume. Indices are short term oversold region and ripe for a bounce.

From Briefing.com:

The S&P 500 lost 0.3% on Monday, as shares of big tech companies fell on various reports that heightened antitrust concerns. Lingering trade and growth concerns also helped curb risk sentiment and underpin the strength in U.S. Treasuries. A swarm of buyers in the last 30 minutes of action, however, helped the broader market close off its session lows.

The tech-sensitive Nasdaq Composite fell 1.6%. The blue-chip Dow Jones Industrial Average (+0.02%) finished fractionally higher, and the small-cap Russell 2000 increased 0.3%.

[…]

Growing expectations for a rate cut, and general growth concerns, helped send the 2-yr yield down 12 basis points to 1.83%. The 10-yr yield declined six basis points to 2.08%. The U.S. Dollar Index fell 0.5% to 97.22. WTI crude decreased 0.5% to $53.25/bbl, giving up an intraday rebound effort.

[…]

• The ISM Manufacturing Index for May checked in at 52.1% (Briefing.com consensus 52.6%), down from 52.8% in April. The May reading is the lowest since October 2016. The May reading is the lowest since October 2016.
o The key takeaway from the report is that it reflects a deceleration in national manufacturing activity that will contribute to the burgeoning growth concerns for the U.S. economy. According to the ISM, the past relationship between the PMI and the overall economy indicates the PMI for May corresponds to a 2.7% increase in real GDP on an annualized basis.
• Total construction spending was unchanged in April (Briefing.com consensus +0.4%) following an upwardly revised 0.1% increase (from -0.9%) in March.
o The key takeaway from the report is that it was better than the headline suggests, after accounting for the March revision, yet that still didn’t change the fact that total construction spending is soft, evidenced by the 1.2% yr/yr decline that was driven by an 11.2% yr/yr decline in residential spending.

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