Morning Notes – Friday August 2, 2019

Directional Bias For The Day:

  • S&P Futures are sharply lower
  • The odds are for a down – watch for break above 2895.25 for change of fortune
  • Key economic data due:
    • Final Service PMI (4est. 52.2; prev. 52.2) at 9:45 AM
    • ISM Non-Manufacturing OMI (est. 55.5; prev. 55.1) at 10:00 AM

Markets Around The World

    • Markets in the East closed lower
    • European markets are lower
    • Currencies:
Up Down
  • EUR/USD
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • NZD/USD
  • Dollar index
  • USD/CAD
  • USD/INR
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Palladium
    • Platinum
    • Crude Oil
    • NatGas
    • Copper
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 1.768%, down from August 2 close of 1.855%;
    • 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 2887.50, 2879.62 and 2874.81.67, 2958.08 and 2952.22
  • Critical resistance levels for S&P 500 are 2897.27, 2905.44 and 2914.11
  • Key levels for eMini futures: break above 2895.25, the high of 7:00 AM and break below 2882.75, the low of 10:00 AM on June 13

Pre-Open

  • On Friday, at 4:00 PM, S&P future closed at 2932.00 and the index closed at 2932.05 – a spread of about 0.00 points; futures closed at 2382.50 for the day; the fair value is -0.05
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -46.25; Dow by -370 and NASDAQ by -158.50

Directional Bias Before Open

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

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 August 2 was a large red bearish engulfing that closed below past five weeks’ close; small lower shadow and almost no upper shadow
    • Retracing from 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 65; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up -93.81 or -3.1%; the 5-week ATR is 62.48,
  • Last week’s pivot point=2957.26, R1=3000.40, R2=3069.76; S1=2888.90, S2=2845.76; S1/S2/S3 pivot levels were breached
  • A down week; second in last five weeks and fourth 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
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A red hammer candle with large lower shadow and almost no upper shadow
    • %K below %D; turning up from below 20
    • RSI-9 is near 30 and declining
    • Sequence of higher highs and higher lows since June 3 is breached
  • Below 20-day EMA and 50-day EMA; above 100-DAY SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
    • Moving down since 12:00 PM on August 1 in waterfall steps
      • RSI-21 moving down since August 1; around 20
      • %K crisscrossing %D below 20
    • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving down since 11:00 AM on August 1
    • RSI-21 mostly below 40 August 1
    • %K crisscrossing near 30; potential Bullish Divergence
    • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting down since 3:30 AM on August 2
  • The Bollinger Band was relatively narrow from 2:45 AM to 4:30 AM; expanding slightly since with price walking down the lower band
  • Stochastic (9, 1, 3): %K crisscrossing %D near 20
  • Bias: Down

Previous Session

Major U.S. indices closed sharply lower on Friday, August 2 in volume lower than the previous day’s volume but higher than 10-day moving average.

For the week, indices declined sharply in increased volume. All but two S&P sectors, Utilities and Real Estate, closed lower for the week.

From Briefing.com:

Wall Street ended Friday with more losses, as investors remained fixated on possible China tariffs and brushed aside an in-line employment report. The S&P 500 (-0.7%) and Dow Jones Industrial Average (-0.4%) finished well off session lows, while the Nasdaq Composite (-1.3%) and Russell 2000 (-1.1%) fell over 1.0%.

[…]

Most of Friday’s decline, however, took place in the first 90 minutes of action. Each of the major averages fell below their 50-day moving averages, which appeared to welcome a buy-the-dip mentality that abated the early selling pressure. The Russell 2000 was the only major U.S. index that closed below the key technical level.

The S&P 500 information technology (-1.7%) and energy (-1.3%) sectors led today’s decline, with the latter unable to benefit from the rebound in oil ($55.74/bbl, +$1.75, +3.2%). The defensive-oriented real estate (+0.8%), consumer staples (+0.1%), and utilities (+0.1%) sectors were the lone sectors that finished higher.

[…]

U.S. Treasuries continued to see increased demand, which pushed yields lower in a curve-flattening trade. The 2-yr yield declined one basis point to 1.71%, and the 10-yr yield declined four basis points to 1.86%. The U.S. Dollar Index declined 0.3% to 98.11.

[…]

• Job growth was decent in July, wage growth was decent, the unemployment rate stayed near a 50-year low with a slight pickup in the labor force participation rate, and there was a sizable drop in the number of long-term unemployed persons.
o The key takeaway from the report is that it was a good report in aggregate, which means it didn’t offer enough bad news to convince the Fed that it needs to cut the fed funds rate again in September.
• The final July reading for the University of Michigan Index of Consumer Sentiment checked in at 98.4 (Briefing.com consensus 98.6) versus the preliminary reading of 98.2 and the final June reading of 98.2.
o The key takeaway from the report is that the economic uncertainty and trade uncertainty that has bothered the Fed has yet to bother the consumer in a noticeably adverse way.
• The trade deficit for June narrowed slightly to $55.2 billion (Briefing.com consensus -$54.6 billion) from $55.3 billion in May, as imports (-$4.6 billion) fell slightly more than exports (-$4.4 billion).
o The key takeaway from a growth standpoint is that both exports and imports fell in June.
• Factory orders increased 0.6% in June (Briefing.com consensus 0.8%) on the heels of downwardly revised 1.3% decline (from -0.7%) in May, which followed a 1.2% decline in April.
o The key takeaway from the report is that nondefense capital goods orders, excluding aircraft — a proxy for business spending — were revised down to 1.5% from the preliminary report showing a 1.9% increase. Shipments of those same goods were up 0.3% versus 0.6% in the preliminary report. That will compute as a drag in the second estimate for Q2 GDP.