Morning Notes – Thursday July 11, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving sideways since 10:00 PM on Wednesday
  • The odds are for a sideways to up day – watch for break above 3006.75 and break below 2990.50 for clarity
  • Key economic data due:
    • CPI ( est. 0.0%; prev. 0.1%) at 8:00 AM
    • Core CPI ( est. 0.2%; prev. 0.1%) at 8:00 AM
    • Unemployment Claims (est,. 220K; prev. 221K) at 8:00 AM
    • Fed Chair’s Humphrey-Hawkins Testimony

Markets Around The World

  • Markets in the East closed higher
  • European markets are mixed – Germany, U.K., Spain and Switzerland are down; France, Italy and STOXX-600 are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Coffee
    • Cocoa
    • Copper
    • Palladium
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield closed at 2.061%, up from July 10 close of 2.054%;
    • 30-years is at 2.571%, up from 2.531%
    • 2-years yield is at 1.832%, down from 1.917%
    • The 10-Year-&-2-Year spread is at 0.229, up from 0.137

Key Levels:

  • Critical support levels for S&P 500 are 2989.68, 2984.62 and 2972.44
  • Critical resistance levels for S&P 500 are 3002.98, 3011.92 and 3020.85
  • Key levels for eMini futures: break above 3006.75, the high of 11:30 PM and break below 3001.00, the low of 3:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2996.75 and the index closed at 2993.07 – a spread of about +3.75 points; futures closed at 2997.50 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +6.25; Dow by +87 and NASDAQ by +17.00

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend
  • 120-Min:Side
  • 30-Min: Up-Side
  • 15-Min: Side
  • 6-Min: Side

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

Monthly
  • Under Pressure
  • June 2019 was a large green Piercing or Bullish Engulfing candle that closed near the open of previous week;
  • 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 July 6 was a green spinning top candle with small upper and long lower shadow; made all time intra-day and closing high
    • Stochastics (9,1, 3): %K and %D are above 90; potential Bearish Divergence for %D
    • RSI (9) is above 65; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up +48.65 or +1.7% and 5-week ATR is 73.32
  • Last week’s pivot point=2979.49, R1=3006.76, R2=3023.11; S1=2963.14, S2=2935.87; R1/R2 pivot levels were breached
  • An up week after 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
  • Above 10-week EMA, 39-week SMA and 89-week SMA
  • Uptrend resumed
Daily
  • A small green doji like candle that gapped up at the open and did not close the gap completely; small lower shadow and relatively longer upper shadow
    • %K crossed above %D; but below the level when the index was lower raising the chance of Bearish Divergence
    • RSI-9 is turning up and is in similar position as Stochastic
    • The sequence of higher highs and higher lows since June 3
  • Above 20-day EMA, 50-day EMA, 100-DAY SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Moving sideways since 10:00 AM on July 10 after bouncing off from a support level on July 9;
    • RSI-21 is moving just below 65 since 10:00 AM on July 10
    • %K is crisscrossing %D around 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 6:00 PM on July 10 after bouncing off a broken downtrend line
    • RSI-21 is moving along 60 since 11:00 AM on Wednesday
    • %K is crisscrossing %D
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 1:15 PM on Wednesday
  • The Bollinger Band is relatively narrow since 2:15 AM
  • Stochastic (9, 1, 3): %K crisscrossing %D
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, July 10 in mixed volume. Dow Jones Industrial Average, Dow Jones Transportation Average and NYSE Composite traded in lower volume. DJT closed lower. The indices gapped up at the open and then traded down in the first hour before settling at the mid-range and moving sideways for the rest of the day.

From Briefing.com:

The S&P 500 gained 0.5% on Wednesday, briefly surpassing 3000 for the first time after Fed Chair Powell fueled the market’s expectations for a rate cut at the July 30-31 FOMC meeting. The Dow Jones Industrial Average (+0.3%) and the Nasdaq Composite (+0.8%) also set new intraday highs with the Nasdaq finishing at a record close. The Russell 2000 increased 0.2%.

[…]

The dovish tone helped eight of the 11 S&P 500 sectors finish higher. The S&P 500 energy sector (+1.4%) led the advance, buoyed by higher oil prices ($60.48/bbl, +$2.69, +4.7%) amid bullish inventory data and supply disruption in the Gulf of Mexico. The financials (-0.5%), industrials (-0.3%), and materials (-0.2%) sectors were the only sectors that finished lower.

[…]

Shorter-dated U.S. Treasuries increased noticeably on growing expectations for a sharp rate cut, driving the 2-yr yield down eight basis points to 1.82%. The 10-yr yield increased one basis point to 2.06%. The U.S. Dollar Index declined 0.4% to 97.10.

[…]

• Wholesale inventories increased 0.4% in May, as expected, on top of an unrevised 0.8% increase for April. Wholesale sales increased 0.1% following an unrevised 0.4% decline in April.
o The key takeaway from the report is that inventory growth continues to outpace sales growth on a year-over-year basis, which should help keep price pressures in check.
• The weekly MBA Mortgage Applications Index declined 2.4% following a 0.1% decline in the prior week.