Morning Notes – Tuesday August 6, 2019

Directional Bias For The Day:

  • S&P Futures are higher but have recovered only 20% of Monday’s decline
  • The odds are for an up day with elevated volatility – watch for break below 2831.50 for change of fortune
  • Key economic data due:
    • JOLTS Job Openings (est. 7.34M; prev. 7.2M) at 10:00 AM
    • IBD/TIPP Economic Optimism (est. 54.6; prev. 56.6)

Markets Around The World

    • Markets in the East closed mostly lower – Mumbai was up
    • European markets are higher
    • Currencies:
Up Down
  • Dollar index
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • NZD/USD
  • USD/CAD
  • EUR/USD
  • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Palladium
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Gold
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.735%, down from August 2 close of 1.855%;
    • 30-years is at 2.295%, down from 2.392%
    • 2-years yield is at 1.577%, down from 1.713%
    • The 10-Year-&-2-Year spread is at 0.158, up from 0.142

Key Levels:

  • Critical support levels for S&P 500 are 2822.12, 2915.32 and 2800.92
  • Critical resistance levels for S&P 500 are 2852.09, 2859.51 and 2877.43
  • Key levels for eMini futures: break above 2865.00, the high of 7:30 AM and break below 2831.50, the low of 0:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future closed at 2844.25 and the index closed at 2844.74 – a spread of about 0.50 points; futures closed at 2830.00 for the day; the fair value is +14.75
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +29.25; Dow by +276 and NASDAQ by +90.00

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend Under Pressure
  • 120-Min:Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: 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 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 large red candle with large no upper shadow and a lower shadow that is one fifth of the real body
    • %K below %D; near 10
    • RSI-9 is below 20
  • Below 20-day EMA, 50-day EMA and 100-DAY SMA; above 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
    • Bouncing up from a low of 2775.75 at 6:00 PM; up 75 point since; declined more than 100 on Monday
      • RSI-21 moving up from a low of 5.88 and 6:00 PM
      • %K crossed above %D at 8:00 PM
    • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Bouncing up since 7:30 PM
    • RSI-21 has risen from low near 20 to above 50
    • %K crisscrossing around 80
    • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 11:30 PM
  • The Bollinger Band is relatively narrow but still large; price walking up the upper band
  • Stochastic (9, 1, 3): %K crossed below %D at 7:45 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Monday, August 5 in volume higher volume. The indices gapped down at the open and then declined for most of the day.

From Briefing.com:

The stock market had its worst day of 2019 with each of the major U.S. indices losing around 3% on Monday. Trade and growth concerns rattled capital markets after China devalued the yuan to its weakest level against the dollar since 2008. Broad-based selling left the S&P 500 down 3.0% for the day.

The Dow Jones Industrial Average fell 2.9%, the Nasdaq Composite fell 3.5%, and the Russell 2000 fell 3.0%.

[…]

On a related note, all of Germany’s sovereign debt yielded negative rates for the first time on Monday.

The 2-yr yield dropped 13 basis points to 1.58%, and the 10-yr yield dropped 12 basis points to 1.74%. The U.S. Dollar Index fell 0.5% to 97.58. WTI crude lost 2.0% to $54.64/bbl.

Separately, gold futures settled 1.2% higher at $1467.20/oz, further helped by weakness in the dollar and declining U.S. Treasury yields. Shares of Newmont Goldcorp (NEM 37.42, +0.51) advanced 1.4%.

[…]

• The ISM Non-Manufacturing Index decreased to 53.7% in July (Briefing.com consensus 55.4) from 55.1% in June. The dividing line between expansion and contraction is 50.0%.
o The key takeaway from the report is that it shows a continuation of a decelerating trend that has been in place since late 2018. The Non-Manufacturing Index is at its lowest level in almost three years.
Looking ahead, investors will receive the JOLTS – Job Openings report for June on Tuesday.