Morning Notes – Friday August 16, 2019

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility – watch for break below 2861.50 for change of fortune
  • Key economic data due:
    • Building Permits ( 1.27M est. ; prev. 1.23M ) at 8:30 AM
    • Housing Starts ( 1.26M est. ; prev. 1.25M ) at 8:30 AM
    • Prelim UoM Consumer Sentiment  ( 97.2 est. ; prev. 98.4 ) at 10:00 AM
    • Prelim UoM Inflation Expectations ( prev. 2.6% ) at 10:00 AM

Markets Around The World

    • Markets in the East were mixed – Shanghai, Hong Kong, Tokyo and Mumbai were up; Sydney, Seoul and Singapore were down
    • European markets are higher
    • Currencies:
Up Down
  • Dollar index
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • EUR/USD
  • NZD/USD
  • USD/CAD
  • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Palladium
    • Cotton
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.529%, down from August 14 close of 1.581%;
    • 30-years is at 1.980%, down from 2.025%
    • 2-years yield is at 1.532%, down from 1.579%
    • The 10-Year-&-2-Year spread is at -0.003, down from 0.002
  • VIX
    • Is at 19.78 down from August 15 close of 21.18, (which made a shooting star like pattern); Below 5-day SMA 20.18
    • Recent high was 24.81 on August 5; recent low was 11.69 on July 25

Key Levels:

  • Critical support levels for S&P 500 are 2854.97, 2837.26 and 2825.51
  • Critical resistance levels for S&P 500 are 2881.25, 2894.15 and 2907.07
  • Key levels for eMini futures: break above 2878.50, the high of 5:00 AM and break below 2861.50, the low of 3:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future closed at 2848.00 and the index closed at 2847.60 – a spread of about +0.50 points; futures closed at 2848.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are higher – at 7:30 AM, S&P 500 futures were up by +25.00; Dow by +226 and NASDAQ by +80.25

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 120-Min:Down-Side
  • 30-Min: Side-Up
  • 15-Min: Side-Up
  • 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 9 was a small green candle near the lows of last week with an upper shadow equal to the real body and a lower shadow equal to five times the real body
    • Retracing from the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K is below %D; Bearish Divergence
    • RSI (9) is near 50; Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was down -13.40 or -0.5%; the 5-week ATR is 74.98,
  • Last week’s pivot point=2893.16, R1=2964.21, R2=3009.76; S1=2847.61, S2=2776.56; S1/S2 pivot levels were breached
  • A down week; third 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 relatively small doji candle near the lows of Wednesday; potential thee-day morning start pattern
    • %K is below %D; below 20
    • RSI-9 below 40
  • Below 20-day EMA, 50-day EMA, 100-DAY SMA; above 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Bouncing up after making lows near 2817.75 at 6:00 Am on August 15; above/in a congestion zone;
    • RSI-21 moving up since 4:00 PM on August 14; made a Bullish Divergence at 6:00 AM on August 15
    • %K is above %D but flattening above 90
  • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Broke above a symmetrical triangle near the lows on Thursday; 61.8% extension target near 2876.00 is achieved; the 100% extension target is near 2897.00
    • RSI-21 rising from oversold levels; Bullish Divergence at 6:30 AM on Thursday; near 60
    • %K is crisscrossing %D around 80
    • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 6:30 PM
  • The Bollinger Band relatively narrowed from 2:45 PM to 4:15 AM; expanding slightly since with price moving near the upper band
  • Stochastic (9, 1, 3): %K is below %D; Bearish Divergence at 7:00 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mixed on Thursday, August 15. S&P 500, Dow Jones Industrial Average, NYSE Composite and Wilshire 5000 Total Market Index closed higher. NASDAQ Composite, Russell 2000 and Dow Jones Transportation Average closed lower. The volume traded was higher than previous day and mixed with respect to the 10-day average. Indices gapped down at the open and then declined for most of the day. Most indices made long legged dojis and creating the potential for three-day morning star pattern. The day’s price action looked like reversal.

From Briefing.com:

The stock market finished mixed on Thursday, as investors weighed the resiliency of the U.S. consumer against familiar growth concerns. The S&P 500 (+0.3%) and Dow Jones Industrial Average (+0.4%) finished higher, while the Nasdaq Composite (-0.1%) and Russell 2000 (-0.4%) finished lower.

[…]

Leadership was concentrated among the defensive-oriented sectors — consumer staples (+1.5%), real estate (+1.3%), and utilities (+1.3%) — which benefited from Walmart’s report and another drop in U.S. Treasury yields.

[…]

The 2-yr yield finished nine basis points lower at 1.49%, and the 10-yr yield finished five basis points lower at 1.53%. The 30-yr yield fell below 2.00%, finishing five basis points lower at 1.98%. The U.S. Dollar Index increased 0.1% to 98.10.

[…]

• Retail sales increased 0.7% m/m in July (Briefing.com consensus 0.3%) and were up 1.0%, excluding autos (Briefing.com consensus 0.3%).
o The key takeaway from the report is that it offered a clear reminder that the U.S. consumer is still in good shape, which is key to fending off a recession.
• Initial claims for the week ending August 10 increased by 9,000 to 220,000 (Briefing.com consensus 215,000). Continuing claims for the week ending August 3 jumped by 39,000 to 1.726 million.
o The key takeaway from the report is that there wasn’t any meaningful shift in the underlying trend (which is solid) for initial claims, as the four-week moving average moved up just 1,000 to a low 213,750.
• Nonfarm business sector productivity increased 2.3% in the second quarter (Briefing.com consensus 1.3%) after increasing a revised 3.5% in Q1 (from 3.4%), according to the preliminary reading. Unit labor costs increased 2.4% in the second quarter (Briefing.com consensus 1.6%) after increasing a revised 5.5% (from -1.6%) in Q1.
o The key takeaway from the report is the improved trend in productivity, which was up 1.8% from the second quarter of 2018 to the second quarter of 2019 versus the annual average of 1.3% for 2018 and 2017, and 0.3% in 2016.
• Industrial production decreased 0.2% in July (Briefing.com consensus 0.1%) after increasing a revised 0.2% (from 0.0%) in June. The total industry capacity utilization rate fell to 77.5% (Briefing.com consensus 77.8%) from a revised 77.8% (from 77.9%) in June.
o The key takeaway from the report is that the July decrease in industrial production has reduced the yr/yr growth rate to just 0.5%.
• The Empire State Manufacturing Survey for August increased to 4.8 (Briefing.com consensus 1.1) from the prior month’s reading of 4.3.
• The Philadelphia Fed Index for August came in at 16.8 (Briefing.com consensus 10.0), below the 21.8 reading in July.
• The NAHB Housing Market Index increased to 66 in August from 65 in July.