Morning Notes – Wednesday June 5, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving lower since 6:30 AM from a high of 2824.50;
  • Fallen back into a narrow horizontal channel on 30-minute chart from which price broke out at 5:00 AM
  • The odds are for a sideways to an up day with elevated volatility – watch for break below 2806.00 for change of fortune
  • Key economic data due:
    • ADP Non-Farm Employment Change (27K vs. 185K est.; prev. 271K ) at 8:15 AM
    • Final Services PMI (est. 50.9; prev. 50.9) at 9:45 AM
    • ISM Non-Manufacturing PMI ( est. 55.6; prev. 55.5) at 10:00 AM
    • Beige Book at 2:00 PM

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai was down; Mumbai and Singapore were closed
  • European markets are mostly higher – Italy is down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • NZD/USD
    • USD/INR
    • Dollar index
    • USD/CHF
    • AUD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Sugar
    • Cotton
    • Cocoa
    • Crude Oil
    • Copper
    • Palladium
    • Coffee
  • Bonds
    • 10-yrs yield is at 2.088%, down from June 4 close of 2.119%;
    • 30-years is at 2.605%, down from 2.615%
    • 2-years yield is at 1.795%, up from 1.832%
    • The 10-Year-&-2-Year spread is at 0.293, up from 0.239

Key Levels:

  • Critical support levels for S&P 500 are 2791.09, 2784.70 and 2772.54
  • Critical resistance levels for S&P 500 are 2814.79, 2820.19 and 2832.91
  • Key levels for eMini futures: break above 2821.75, the high of 8:00 AM and break below 2806.00, the low of 2:30 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 2803.25 and the index closed at 2803.27 – a spread of about -0.00 points; futures closed at 2805.00 for the day; the fair value is -1.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +10.50; Dow by +100 and NASDAQ by +34.25

Directional Bias Before Open

  • Weekly: Uptrend under pressure
  • Daily: Uptrend under pressure
  • 120-Min: Down-Up
  • 30-Min: Side-Up
  • 15-Min: Up-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 relatively large green candle with almost no upper and lower shadows
    • %K is crossed above %D from below 10; above 50
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9;
    • RSI-9 is bouncing off from near 25; above 40; above its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is broken on May 29
  • Below 20-day EMA, 50-day EMA; at/below 100-DAY SMA; above 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 since 2:00 PM on Monday; broke a sequence of lower highs and lower lows since May 16
    • RSI-21 is rising since 2:00 AM on Monday after making a Bullish Divergence near 25; above 80
    • %K is crisscrossing %D higher since 2:00 AM on Monday after making a Bullish Divergence near 20; above 90;
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Down-Up
30-Minute (e-mini future)
  • Moving up since 3:30 PM on Monday after making a double bottom; the 161.8% extension near 2814.00 is achieved and the 261.% extension target is near 2846.00
    • RSI-21 is moving around 65 since 10:00 AM on Tuesday
    • %K is crossed above %D at 2:30 AM from near 30; above 90
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to up since 10:00 PM
  • The Bollinger Band was narrow from 10:00 PM to 5:00 AM; expanding since with price walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D above 90
  • Bias: Up-Side

Previous Session

Major U.S. indices closed sharply higher on Tuesday, June 4 in mostly lower volume.  Dow Jones Transportation Average traded in higher volume. Indices gapped up at the open and then moved higher. Most made largest green candle since May 15 with almost no upper and lower shadows. Indices were in short term oversold region and ripe for a bounce.

From Briefing.com:

The stock market had its best day since early January, boosted by gains across most sectors and by the prevailing view that the market was due for a bounce from short-term oversold conditions. Each of the major averages rose at least 2.0%, led by the 2.7% gain in the Nasdaq Composite, and the S&P 500 (+2.1%) climbed back above its 200-day moving average (2775).

[…]

Cyclical sectors led the rally with the S&P 500 information technology (+3.3%), materials (+2.8%), financials (+2.7%), consumer discretionary (+2.6%), and industrials (+2.4%) sectors all finishing with gains over 2.0%. The defensive-oriented utilities (unch) and real estate (-0.6%) sectors were left out of the rally.

[…]

Counter to the view that the stock market was oversold on a short-term basis, the Treasury market exhibited weakness on the view that it had gotten overbought on a short-term basis. The 2-yr yield increased five basis points to 1.88%, and the 10-yr yield increased four basis points to 2.12%. The U.S. Dollar Index declined 0.1% to 97.10. WTI crude increased 0.5% to $53.53/bbl.

[…]

• Factory orders declined 0.8% m/m in April (Briefing.com consensus -0.9%) following a downwardly revised 1.3% increase (from 1.9%) in March. Excluding transportation, orders increased 0.3%.
o The key takeaway from the report is the understanding that business investment was weak in April, evidenced by the 1.0% m/m decline in nondefense capital goods orders excluding aircraft.

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