Morning Notes – Wednesday July 31, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving within a narrow horizontal channel – between 3020.00 and 3010.00 – within a bigger horizontal channel – between 3029.00 and 3000.00;
  • The odds are for an up day – watch for break below 3014.00 and 3010.00
  • Watch for emerging Stochastic Bearish Divergence on daily charts
  • Key economic data due:
    • ADP Non-Farm Employment change ( 156K vs. 150K est. ; prev. 112K) at 8:15 AM
    • Employment Cost Index ( 0.6% vas. 0.7% est.; prev. 0.7%) at 8:30 AM
    • Chicago PMI ( est. 51.7 ; prev. 49.7 ) at 9:45 AM
    • FOMC Statement at 2:00 PM
    • Federal Funds Rate ( est. <2.25%; prev.<2.5%) at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Markets Around The World

    • Markets in the East closed mostly lower – Mumbai closed up
    • European markets are mostly higher – U.K and Spain are down
    • Currencies:
Up Down
  • Dollar index
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • USD/CAD
  • EUR/USD
  • NZD/USD
  • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Copper
    • Palladium
    • Plainum
    • Cotton
    • Silver
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.054%, down from July 30 close of 2.061%;
    • 30-years is at 2.576%, down from 2.586%
    • 2-years yield is at 1.830%, down from 1.854%
    • The 10-Year-&-2-Year spread is at 0.212, down from 0.227

Key Levels:

  • Critical support levels for S&P 500 are 3009.50, 3000.94 and 2997.24
  • Critical resistance levels for S&P 500 are 3019.10, 3023.06 and 3027.98
  • Key levels for eMini futures: break above 3020.25, the high of 1:00 AM and break below 3014.00, the low of 3:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future closed at 3014.75 and the index closed at 3013.18 – a spread of about +1.50 points; futures closed at 3012.25 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +6.25; Dow by +74 and NASDAQ by +31.75

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend
  • 120-Min:Side
  • 30-Min: 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 26 was a large green candle near the upper bound of a broadening pattern; all time highs
    • At the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed above %D above 90; potential Bearish Divergence for %D
    • RSI (9) is turning up from just below 70; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up +49.25 or +1.7%; the 5-week ATR is 51.37, higher than previous week
  • Last week’s pivot point=3010.16, R1=3043.68, R2=3061.49; S1=2992.35, S2=2958.83; R1 pivot level was breached
  • An up week; third in last five weeks and sixth 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 doji like green candle that gapped down at the open with small lower and upper shadows;
    • %K below %D from above 80; potential Bearish Divergence
    • RSI-9 is turning down 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 8:00 AM on July 30; within a horizontal channel between 3027.25 and 3001.50 near the mid-point, which is also a congestion zone
      • RSI-21 rising since 6:00 AM on July 30 from near 25
      • %K crossing below %D near 80
    • At/above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 9:30 AM on July 30;
    • RSI-21 mostly moving along 50 since 10:00 PM
    • %K is crossing below %D lower;
    • At/above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways since 2:00 AM
  • The Bollinger Band mostly narrow since 2:00 AM
  • Stochastic (9, 1, 3): %K crisscrossing %D
  • Bias: Side

Previous Session

Major U.S. indices closed mostly lower on Tuesday, July 30 in mixed volume. Russell 2000 and Dow Jones Transportation Average closed higher. DJTRAN and NASDAQ Composite traded in higher volume.

From Briefing.com:

The stock market wavered mostly in negative territory on Tuesday, leaving the S&P 500 (-0.3%), Dow Jones Industrial Average (-0.1%), and Nasdaq Composite (-0.2%) with slight losses. There weren’t too many positive catalysts for the broader market, but the small-cap Russell 2000 did advance 1.1% to finish near session highs.

[…]

The final standings reflected a mixed session with five S&P 500 sectors finishing higher and six sectors finishing lower. The utilities (-0.8%), information technology (-0.7%), and consumer discretionary (-0.7%) sectors underperformed, while the energy (+1.1%), real estate (+0.9%), and materials (+0.6%) sectors finished on top.

[…]

U.S. Treasuries finished slightly lower in another muted session. The 2-yr yield and the 10-yr yield increased one basis point each to 1.85% and 2.06%, respectively. The U.S. Dollar Index finished unchanged at 98.05.

[…]

• Personal income increased 0.4% (Briefing.com consensus 0.4%) while personal spending rose 0.3% (Briefing.com consensus 0.3%) m/m in June. The PCE Price Index was up 0.1%, as expected, and the core PCE price Index, which excludes food and energy, jumped 0.2%, also as expected. On a yr/yr basis, the PCE Price Index held steady at 1.4% while the core PCE Price Index edged up to 1.6% from 1.5% in May.
o The key takeaway from the report is that it contained decent consumer data and tame inflation data, which is not all that surprising relative to recent data seen of late.
• The Conference Board’s Consumer Confidence Index surged to 135.7 in July (Briefing.com consensus 125.5) from an upwardly revised 124.3 (from 121.5) in June. That is the highest reading since November 2018 and the third-highest reading since October 2000.
o The key takeaway from the report is that consumers are optimistic about current and prospective business and labor market conditions, and have improved expectations for their financial outlook. That is a supportive combination that will encourage increased consumer spending activity.
• The S&P Case-Shiller Home Price Index for May increased 2.4% (Briefing.com consensus 3.5%) after increasing 2.5% in April.
• Pending Home Sales increased 1.6% in June (Briefing.com consensus +1.0%). Today’s reading follows an unrevised increase of 1.1% in May.