Morning Notes – Monday August 5, 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
  • Dollar index
  • 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
  • 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


  • 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 -0.50
  • 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 Under Pressure
  • 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:

  • 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
  • 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
  • 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.


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 ( 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 ( 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 ( 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.





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