Morning Notes – Monday July 22, 2019

Directional Bias For The Day:

  • S&P Futures are higher; drifting higher since 4:40 PM on Friday in an upsloping flag, which is usually bearish
  • The odds are for a sideways to down day from pre-open levels – watch for break above 3001.00 for change of fortune
  • No key economic data due:

Markets Around The World

    • Markets in the East closed lower
    • European markets are mostly higher – Switzerland is down
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • NZD/USD
  • USD/CAD
  • USD/INR
  • EUR/USD
  • GBP/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
      Silver
    • Platinum
    • Cotton
    • Cocoa
    • Copper
    • Palladium
    • Sugar
    • Coffee
  • Bonds
    • 10-yrs yield closed at 2.048%, up from July 18 close of 2.038%;
    • 30-years is at 2.578%, up from 2.568%
    • 2-years yield is at 1.826%, up from 1.752%
    • The 10-Year-&-2-Year spread is at 0.222, down from 0.286

Key Levels:

  • Critical support levels for S&P 500 are 2973.09, 2963.44 and 2955.92
  • Critical resistance levels for S&P 500 are 2987.37, 3000.00 and 3006.02
  • Key levels for eMini futures: break above 2988.25, the high of 8:00 AM and break below 2979.00, the low of 3:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (June contract) closed at 2979.75 and the index closed at 2976.61 – a spread of about +1.00 points; futures closed at 2977.00 for the day; the fair value is +2.75
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +9.50; Dow by +69 and NASDAQ by +38.50

Directional Bias Before Open

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

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 19 was a large bearish engulfing candle near the upper bound of a broadening pattern
    • At the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D from above 90; potential Bearish Divergence for %D
    • RSI (9) is turning down from just below 70; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was down -37.16 or -1.2%; the 5-week ATR is 44.71, lower than previous week
  • Last week’s pivot point=2989.17, R1=3005.24, R2=3033.88; S1=2960.53, S2=2944.46; S1 pivot level was breached
  • A down week; third 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 relatively large red dark cloud cover candle with very almost no upper and small lower shadows;
    • %K below %D and nearing 20
    • RSI-9 is turning down from just above 65 and after making a 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)
  • Drifting up since 4:00 AM on July 19 after mostly declining since July 15
    • RSI-21 is bouncing from below 30 and after making a Bullish Divergence
    • %K is above %D from below 30
    • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Drifting up since 4:30 PM on July19; forming an upsloping Flag
    • RSI-21 rising below 25 to near 50
    • %K is crisscrossing %D higher
    • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting higher since 1:00 AM
  • The Bollinger Band narrowed from 10:15 PM to 1:15 AM; expanding since with price walking up  the upper band
  • Stochastic (9, 1, 3): %K crossed above %D at 8:15 AM
  • Bias: Down-Up

Previous Session

Major U.S. indices closed mostly lower on Friday, July 19 in mostly higher volume. Dow Jones Transportation Average traded higher in lower volume. The indices mostly declined during the day. Dow Jones Industrial Average resisted the downward pressure for a while but gave up midday.

For the week, indices declined in mostly higher volume. DJIA traded in lower volume for the week. All but two S&P sectors – Staples and Materials – declined for the week.

From Briefing.com:

The S&P 500 faded into the close and lost 0.6% on Friday, as geopolitical angst and expectations for a smaller Fed rate cut weighed on the broader market. The Nasdaq Composite lost 0.7%, and the Russell 2000 lost 0.5%.

The Dow Jones Industrial Average (-0.3%) fared slightly better, supported by shares of Boeing (BA 377.36, +16.25, +4.5%) after it announced a $4.9 billion charge for its 737 MAX grounding.

Price action for most of the day had been muted until Iran said it seized a British oil tanker and The Wall Street Journal reported that the Fed is signaling a 25-basis points rate cut at the July 30-31 FOMC meeting.

[…]

According to the CME FedWatch Tool, the implied likelihood for the quarter-point cut climbed to 77.5% from 39.8% yesterday.

[…]

• The preliminary University of Michigan Consumer Sentiment Index for July checked in at 98.4 (Briefing.com consensus 98.9) versus the final reading of 98.2 for June.
o The key takeaway from the report is the finding that consumers’ expectations fall as their inflation expectations rise, so it will be assumed for the time being that consumer expectations will remain elevated since their one-year inflation expectations dipped from 2.7% to 2.6%.