Morning Notes – Wednesday July 17, 2019

Directional Bias For The Day:

  • S&P Futures are little changed; mostly moving sideways since 10:30 PM on Sunday
  • The odds are for a to sideways to down day – watch for break below 3021.75 for change of fortune
  • Key economic data due:
    • Building Permits ( est. 1.30M; prev. 1.29M ) at 8:30 AM
    • Housing Starts ( est. 1.26M  ; prev. 1.27M) at 8:30 AM
    • Beige Book at 2:00 PM

Markets Around The World

    • Markets in the East closed mixed – Shanghai, Hong Kong Tokyo and Seoul closed down; Sydney, Mumbai, Seoul and Singapore closed higher
    • European markets are mostly lower – Switzerland is higher
    • Currencies:
Up Down
  • EUR/USD
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • NZD/USD
  • USD/INR
  • Dollar index
  • AUD/USD
  • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Sugar
    • Coffee
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 2.122%, up from July 15 close of 2.092%;
    • 30-years is at 2.612%, up from 2.612%
    • 2-years yield is at 1.850%, up from 1.833%
    • The 10-Year-&-2-Year spread is at 0.272, up from 0.259

Key Levels:

  • Critical support levels for S&P 500 are 2001.15, 2988.80 and 2984.62
  • Critical resistance levels for S&P 500 are 3009.53, 3015.02 and 3017.80
  • Key levels for eMini futures: break above 3012.75, the high of 6:00 AM and break below 3003.25, the low of 9:00 PM on Tuesday

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 3007.50 and the index closed at 3004.04 – a spread of about +3.50 points; futures closed at 3007.00 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are little changed – at 7:30 AM, S&P 500 futures were up by +0.50; Dow up by +2 and NASDAQ up by +5.50

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend
  • 120-Min:Up-Side
  • 30-Min: Up-Side
  • 15-Min: Down-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 12 was a green candle with almost no upper shadow and small lower shadow; made all time intra-day and closing high
    • At the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K and %D are above 90; potential Bearish Divergence for %D
    • RSI (9) is rising and above 65; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up +23.36 or +0.8% and 5-week ATR is 52.19
  • Last week’s pivot point=2997.04, R1=3030.65, R2=3047.52; S1=2980.17, S2=2946.56; R1 pivot level was breached
  • An up week; fourth in last five weeks and fifth in last ten weeks
  • Last swing low, 2728.81, was the low on June 3, 2018; previous all-time high of 2940.91 was breached during July 1 week
  • Above 10-week EMA, 39-week SMA and 89-week SMA
  • Uptrend resumed
Daily
  • A small red spinning top candle with very small upper and lower shadows;
    • %K is below %D from above 90
    • RSI-9 is below 75; potential Bearish Divergence
    • 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 mostly sideways to down since 2:00 AM on July 15 after Bearish Divergence on RSI-9; Moving higher ; from lower-left, on June 12, to upper-right corner, today, on the chart;
    • RSI-21 is drifting down since 2:00 AM on Monday; Bearish Divergence
    • %K is below %D
    • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving mostly sideways to down since 3:30 AM on July 15 after Bearish Divergence on RSI-9 and Stochastic
    • RSI-21 is rising from below 30 at 12:00 PM on Tuesday; just above 40
    • %K is below %D below 20
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 9:30 PM on July 16
  • The Bollinger Band is relatively expanding since 9:30 PM on Tuesday
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mostly lower on Tuesday, July 16 in higher volume. Dow Jones Transportation Average and Russell 2000 closed down. The day’s price range was narrow.

From Briefing.com:

The S&P 500 lost 0.3% on Tuesday, led lower by shares of energy and technology companies while bank earnings failed to generate much excitement. The Dow Jones Industrial Average lost 0.1%, and the Nasdaq Composite lost 0.4%. The Russell 2000 finished flat.

The session began with very little price action, although the Dow did set a new all-time high in the early going amid positive reactions to earnings reports from JPMorgan Chase (JPM 115.12, +1.22, +1.1%) and Goldman Sachs (GS 215.52, +3.94, +1.9%). Like JPM and GS, Wells Fargo (WFC 45.30, -1.41, -3.0%) and Johnson & Johnson (JNJ 132.50, -2.21, -1.6%) beat earnings estimates, but shares finished noticeably lower.

[…]

Energy stocks were pressured by lower oil prices ($57.61/bbl, -$1.90, -3.2%) after Secretary of State Mike Pompeo said that Iran was ready to negotiate on its missile program. The industrials sector benefited from gains in the transport stocks after JB Hunt Transport Services (JBHT 97.73, +5.15, +5.6%) provided positive earnings results and an upbeat outlook for the second half of the year. The Dow Jones Transportation Average advanced 1.8%.

[…]

Retail sales for June increased 0.4% (Briefing.com consensus 0.2%), which contributed to the declining interest in U.S. Treasuries. The 2-yr yield and the 10-yr yield increased three basis points each to 1.86% and 2.12%, respectively. The U.S. Dollar Index advanced 0.5% to 97.38.

[…]

• Total retail sales were up 0.4% m/m in June (Briefing.com consensus +0.2%) following a downwardly revised 0.4% increase (from +0.5%) in May. Retail sales, excluding autos, were also up 0.4% (Briefing.com consensus +0.2%) following a downwardly revised 0.4% increase (from +0.5%) in May. Core retail sales, which exclude motor vehicle, gasoline station, building materials, and food services and drinking places sales, jumped 0.7% m/m.
o The key takeaway from the report is that it was a solid report overall and will diminish the prospect of a 50-basis points cut at the July 30-31 FOMC meeting.
• Import prices declined 0.9% m/m following an upwardly revised unchanged reading (from -0.3%) for May. Excluding fuel, import prices were down 0.3% for the second straight month. Export prices declined 0.7% m/m and were down 1.1% excluding agricultural exports.
o The key takeaway from the report is the lack of inflation pressure seen in it. Nonfuel import prices were down 1.4% yr/yr, versus up 1.5% for the 12-month period ending June 2018. Nonagricultural export prices were down 1.6% yr/yr after being up 5.3% for the 12-month period ending June 2018.
• Industrial production was unchanged in June (Briefing.com consensus +0.2%) after increasing an unrevised 0.4% in May. The total industry capacity utilization rate fell to 77.9% (Briefing.com consensus 78.2%) from an unrevised 78.1% in May.
o The key takeaway from the report is that factory production declined at an annual rate of 2.2% in the second quarter, which was roughly the same pace as in the first quarter.
• Business inventories increased 0.3% in May (Briefing.com consensus 0.4%) following an unrevised 0.5% increase in April. Business sales increased 0.2% after declining an unrevised 0.2% in April.
o The key takeaway from the report is that the gap between inventory growth on a yr/yr basis (+5.3%) and sales growth (+1.5%) has widened, which should keep prices in check.
• The NAHB Housing Market Index for July came in at 65 (Briefing.com consensus 62), up from 64 from June.