Morning Notes – Thursday August 1, 2019

Directional Bias For The Day:

  • S&P Futures are slightly higher; bouncing up from the lows reached at the NYSE close
  • The odds are for a down to sideways day – watch for break above 2996.00 for change of fortune
  • Key economic data due:
    • Challenger Jobs Cut (43.2%; prev. 12.8%) at 7:30 AM
    • Unemployment Clams ( 215K vs. 212K est. ; prev. 207K) at 8:30 AM
    • ISM Manufacturing PMI (est. 52.0; prev. 51.7) at 10:00 AM

Markets Around The World

    • Markets in the East closed mostly lower – Tokyo closed up
    • European markets are mostly higher – U.K is down; Switzerland is closed
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • USD/INR
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Palladium
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.021%, down from July 30 close of 2.061%;
    • 30-years is at 2.527%, down from 2.586%
    • 2-years yield is at 1.870%, up from 1.854%
    • The 10-Year-&-2-Year spread is at 0.151, down from 0.199

Key Levels:

  • Critical support levels for S&P 500 are 2972.67, 2958.08 and 2952.22
  • Critical resistance levels for S&P 500 are 2994.63, 2997.90 and 3011.53
  • Key levels for eMini futures: break above 2989.50, the high of 5:00 AM and break below 2978.75, the low of 4:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future closed at 2979.50 and the index closed at 2980.38 – a spread of about -1.00 points; futures closed at 2982.25 for the day; the fair value is -2.75
  • Pre-NYSE session open, futures are little changed to up – at 8:45 AM, S&P 500 futures were up by +0.75; Dow by +22 and NASDAQ by +10.25

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • July formed a shooting star type doji at all time highs
    • Stochastic is forming a Bearish Divergence
    • RSI-9 is below a downtrend line from January 2018 high; forming a Bearish Divergence
  • June 2019 was a large green Piercing or Bullish Engulfing candle that closed near the open of previous week; May was large Bearish Engulfing candle that closed near the lows
  • 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 large red bearish engulfing candle that tested the lows of the month formed on the first day of the month; almost no upper shadow and large lower shadow and large red real body
    • %K below %D; forming Bearish Divergence
    • RSI-9 is below 50; Bearish Divergence
    • Sequence of higher highs and higher lows since June 3 is breached
  • Below 20-day EMA; Above 50-day EMA, 100-DAY SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
    • Bouncing from a low near 2958.00 since 2:00 PM following the sharp drop;
      • RSI-21 rising from near 10 to below 40
      • %K crossed above %D at 6:00 PM from near 20
    • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving up since 6:00 PM on July 31 from 2966.00;
    • RSI-21 moving up from a low of 20.49 made at 2:30 PM; around 45
    • %K crossed below %D at 6:00 Am above 90; near 60
    • Above 20-bar EMA, below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways to up since 9:45 PM
  • The Bollinger Band narrowed, relatively, from 1:15 AM to 4:30 AM; expanding slightly since price first walked up the upper band and then came back to the middle band
  • Stochastic (9, 1, 3): %K crisscrossing %D below 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Wednesday, July 31 in higher volume. Indices declined after the Fed Statement and press conference at 2:00 PM and 2:30 PM respectively. Indices made shooting star of doji on monthly charts. The Stochastic is forming a Bearish Divergence on monthly charts, which doesn’t bode well, at least for near future, for equities.

From Briefing.com:

The S&P 500 fell as much as 1.8% on Wednesday after Fed Chair Powell indicated that the July rate cut was not the start of an easing cycle. Stocks did rally off lows, though, after Mr. Powell quickly suggested that policy could still accommodate another cut if necessary. The S&P 500 finished lower by 1.1%.

The Dow Jones Industrial Average (-1.2%) and Nasdaq Composite (-1.2%) posted comparable losses to the benchmark index, while the Russell 2000 (-0.7%) fared slightly better.

[…]

U.S. Treasuries also experienced noticeable movements, ultimately flattening the yield curve by session’s end. The 2-yr yield, which touched 1.80% prior to the press conference, finished three basis points higher to 1.88%. The 10-yr yield finished near its lows, declining four basis points to 2.02%. The U.S. Dollar Index rose 0.6% to 98.62. WTI crude increased 0.6% to $58.38/bbl.

[…]

• The ADP Employment Change report showed an estimated 156,000 positions were added to private-sector payrolls in July (Briefing.com consensus 150,000).
• The Q2 Employment Cost Index increased 0.6% (Briefing.com consensus 0.6%), seasonally adjusted, for the three-month period ending in June 2019 after increasing 0.7% for the three-month period ending in March 2019. Wages and salaries, which account for about 70% of compensation costs, rose 0.7%, while benefit costs, which make up the remainder of compensation costs, increased 0.5%.
o The key takeaway from the report is that there has been some moderation in the growth rate of employment costs for civilian workers.
• The July Chicago PMI came in at 44.4 (Briefing.com consensus 50.5), slipping further into contraction territory after coming in at 49.7 in June. A reading below 50.0 denotes a contraction.
• The weekly MBA Mortgage Applications Index declined 1.4% following a 1.9% decline in the prior week.