Morning Notes – Friday June 7, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving down since 6:45 AM from a high of 2856.75 to just below 2850
  • The odds are for an up to sideways day with elevated volatility – watch for break below 2842.25 for change of fortune
  • Key economic data due:
    • Non-Farm Employment Change ( 75K vs. 177K est. ; prev. 24K) at 8:30 AM
    • Unemployment Rate ( 3.6% vs. 3.6% est.; prev. 3.6% ) at 8:30 AM
    • Average Hourly Earnings ( 0.2% vs. 0.3% est.; prev. 0.2%) at 8:30 AM
    • Final Wholesale Inventories ( est. 0.7%; prev. 0.7%) at 10:00 AM

Markets Around The World

  • Markets in the East closed higher – Shanghai and Hong Kong were closed
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/INR
    • EUR/USD
    • AUD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.101%, down from June 6 close of 2.124%;
    • 30-years is at 2.590%, down from 2.622%
    • 2-years yield is at 1.835%, down from 1.855%
    • The 10-Year-&-2-Year spread is at 0.219, down from 0.237

Key Levels:

  • Critical support levels for S&P 500 are 2842.30, 2822.45 and 2815.32
  • Critical resistance levels for S&P 500 are 2852.10, 2863.18 and 2868.75
  • Key levels for eMini futures: break above 2856.25, the high of 7:00 AM and break below 2842.25, the low of 9:00 PM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2845.00 and the index closed at 2843.49 – a spread of about +1.50 points; futures closed at 2845.75 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +7.75; Dow by +65 and NASDAQ by +24.75

Directional Bias Before Open

  • Weekly: Uptrend under pressure
  • Daily: Uptrend under pressure
  • 120-Min: Up
  • 30-Min: Up
  • 15-Min: Up
  • 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 green candle that gapped at the open and then climbed higher; small upper and long lower shadows
    • %K is above %D from below 10; now above 90
    • RSI-9 is above 50 and above its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is broken on May 29
  • Above 20-day EMA; at/above 50-day EMA; above 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 since 2:00 PM on June 3; broke a sequence of lower highs and lower lows since May 16
    • RSI-21 is rising since 2:00 AM on June 3 after making a Bullish Divergence near 25; moving along 75 after reaching a high near 90
    • %K is crisscrossing %D above 90 since higher since 6:00 AM on June 4;
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 9:00 PM on Tuesday; broke above a double bottom pattern and an ascending triangle; achieved most of their targets
    • RSI-21 is mostly moving along 65 since 3:00 PM on June 6
    • %K is crisscrossing %D higher; above 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly sloping up since 3:45 AM on June 5
  • The Bollinger Band was relatively narrow from 2:45 AM to 4:00 AM; expanding slightly since with price walking up the upper band
  • Stochastic (9, 1, 3): %K crossed below %D at 7:00 AM from above 80
  • Bias: Up

Previous Session

Major U.S. indices mostly closed higher on Thursday, June 6 in lower volume. Dow Jones Transportation Average and Russell 2000 closed down. Last two days were good follow-through day for most indices after the big gain on Tuesday but the lower volume dampens it impact. The volume has been lower for the last three days. All S&P sectors were up for the day.

From Briefing.com:

The stock market extended its rally to a third consecutive day on Thursday, boosted by news that the U.S. may delay the proposed 5% tariff rate on all imports from Mexico. The 0.6% gain in the S&P 500 lifted the benchmark index nearly 100 points above last Friday’s closing price

[…]

The Dow Jones Industrial Average increased 0.7%, and the Nasdaq Composite increased 0.5%. The Russell 2000 (-0.2%), however, lost ground for the second straight session.

[…]

A turnaround in oil prices ($52.64, +$0.98, +1.9%) padded the rebound in the energy sector (+1.7%), semiconductor stocks boosted the information technology sector (+1.1%), and the trade-sensitive materials sector (+1.1%) also outperformed. The Philadelphia Semiconductor Index advanced 1.3%.

[…]

On a related note, the European Central Bank left its key rates unchanged as was expected, and it expects those rates to remain at their current levels at least through the first half of 2020. The euro advanced 0.5% against the dollar to 1.1272. The U.S. Dollar Index declined 0.3% to 97.06.
Shorter-dated U.S. Treasuries backtracked from yesterday’s advance, pushing the 2-yr yield up five basis points to 1.89%. The 10-yr yield finished unchanged at 2.12% for the second straight day.

[…]

• Initial claims for the week ending June 1 hit 218,000 (Briefing.com consensus 220,000), representing no change from the prior week’s revised level (from 215,000). Continuing claims for the week ending May 25 increased by 20,000 to 1.682 mln.
o The key takeaway from the report is that claims continue reflecting a tight labor market.
• Nonfarm business sector productivity increased 3.4% in the first quarter (Briefing.com consensus 3.4%), according to the revised reading. The initial reading estimated that productivity increased 3.6% in Q1. Unit labor costs decreased 1.6% in the first quarter (Briefing.com consensus -0.8%), down from the initial estimate of a decrease of 0.9%.
o The key takeaway from the report is that the decrease in unit labor costs indicates muted inflationary pressures.
• The trade deficit narrowed to $50.8 bln in April from a revised deficit of $51.9 bln (from $50.0 bln) in March. Exports of $206.8 bln were $4.4 bln below the March level while imports of $208.7 bln were $5.4 bln below the March total.
o The key takeaway from the report is that even with the modest April decrease, the monthly deficit level has not changed much over the past year.

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