Morning Notes – Friday July 26, 2019

Directional Bias For The Day:

  • S&P Futures are higher; drifting sideways since 9:30 PM on Thursday;
  • The odds are for sideways to up day – watch for break below 3010.50 for change of fortune
  • Watch for emerging Stochastic Bearish Divergence on daily charts
    • Advanced GDP Key (est. 1.8%; prev. 3.1%) at 8:30 AM
    • Advanced GDP Price Index (est. 4.0% ; prev. 0.9%) at 8:30 AM

Markets Around The World

    • Markets in the East closed mostly lower – Shanghai and Mumbai closed up
    • European markets are mostly higher – Spain and Italy are down
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Cocoa
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.074%, up from July 24 close of 2.050%;
    • 30-years is at 2.603%, down from 2.578%
    • 2-years yield is at 1.866%, up from 1.822%
    • The 10-Year-&-2-Year spread is at 0.208, down from 0.228

Key Levels:

  • Critical support levels for S&P 500 are 300.56, 2997.24 and 2988.57
  • Critical resistance levels for S&P 500 are 3014.48, 3016.31 and 3019.59
  • Key levels for eMini futures: break above 3017.25, the high of 6:30 AM and break below 3010.50, the low of 3:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 3006.75 and the index closed at 3003.67 – a spread of about +3.00 points; futures closed at 3006.50 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +9.00; Dow by +78 and NASDAQ down by +33.25

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend
  • 120-Min:Up
  • 30-Min: Up
  • 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 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 red harami candle with small upper and lower shadows;
    • %K crossed below %D from above 80; potential Bearish Divergence
    • RSI-9 is turning down from near 60
    • 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; declined on July 25 but rising since 2:00 PM;
    • RSI-21 rising from near 35 to above 50
    • %K crossed above %D at 12:00 PM on Thursday
    • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 12:30 PM on July 25 after declining earlier in the day;
    • RSI-21 is rising since 12:30 PM but below a downtrend line
    • %K crossed below %D at 6:00 AM
    • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 6:15 PM on July 25
  • The Bollinger Band narrowed from 2:30 AM to 5:00 AM; expanding since
  • Stochastic (9, 1, 3): %K is below %D since 6:00 AM;
  • Bias: Side

Previous Session

Major U.S. indices closed lower on Thursday, July 25 in mixed volume. Dow Jones Industrial Average and Russell 2000 traded in lower volume. The indices opened lower and then traded lower for most of the day. Most made red harami candle and potential Bearish Divergence is emerging with Stochastic.

From Briefing.com:

The stock market ended Thursday near session lows after spending the day in negative territory. The Dow (-0.5%) and S&P 500 (-0.5%) posted comparable losses while the Nasdaq (-1.0%) underperformed throughout the session.

Quarterly earnings were in focus today, and while the market received a fair share of above-consensus results, individual names did not respond nearly as well. For instance, Facebook (FB 200.71, -3.95, -1.9%) beat earnings and revenue expectations, but cautioned that its revenue growth will slow.

[…]

The top-weighted technology sector (-0.8%) was among today’s weakest groups while most of the remaining cyclical sectors recorded slimmer losses. The energy sector (-1.2%) was an exception, finishing at the bottom of the leaderboard, even though crude oil ticked up 0.2% to $56.03/bbl.

Elsewhere, industrials (-0.2%) and consumer staples (unch) held slim gains in early trade, but could not stay above their flat lines through the close.

[…]

On the international front, the European Central Bank released a dovish policy statement, and ECB President Mario Draghi made it clear that the central bank intends to take steps to increase inflation in the eurozone. However, the ECB President did not announce any new measures today.

Treasuries started the day on their highs, but backtracked after the release of a stronger than expected Durable Orders report for June. Today’s $32 bln 7-yr Treasury note auction was received with soft demand, representing the third consecutive weak note auction. The 10-yr yield rose two basis points to 2.07%.

[…]

• New orders for durable goods jumped 2.0% m/m in June (Briefing.com consensus 1.0%) following a downwardly revised 2.3% decline (from -1.3%) in May. Excluding transportation, new orders rose a healthy 1.2% (Briefing.com consensus 0.3%) following an upwardly revised 0.5% increase (from 0.3%) in May.
o The key takeaway from the report is that it revealed a welcome pickup in business spending, which is embedded in the 1.9% increase in nondefense capital goods orders, excluding aircraft. Shipments of those goods were also up 0.6%, which will be a positive input for Q2 GDP forecasts.
• Initial claims for the week ending July 20 declined by 10,000 to 206,000 (Briefing.com consensus 215,000) while continuing claims for the week ending July 13 fell by 13,000 to 1.676 million.
o The key takeaway from the report is that there was nothing new to take away from it: initial claims remain near historically low levels in a reflection of a tight labor market.
• The advance June goods trade deficit totaled $74.20 bln (prior deficit of $75.00 bln).
• Advance Retail Inventories decreased 0.1% in June after increasing 0.3% in May.
• Advance Wholesale Inventories increased 0.2% in June after increasing by 0.4% in May.