Morning Notes – Thursday August 22, 2019

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up to sideways day – watch for break below 2918.50 for change of fortune
  • Key economic data due:
    • Unemployment Claims ( 217K est. ; prev. 220K) at 8:30 AM
    • Flash Manufacturing PMI ( 50.5 est.; prev. 50.4) at 9:45 AM
    • Flash Services PMI ( 52.9 est. ; prev. 53.0 ) at 9:45 AM
    • CB Leading Index (0.2% est.; prev. 0.2%) at 10:00 AM

Markets Around The World

    • Markets in the East were mixed – Shanghai, Tokyo, Sydney and Singapore were up; Hong Kong, Mumbai and Seoul were down
    • European markets are mixed – Germany, Spain and Italy were up; U.K., France, Switzerland and STOXX 600 are down
    • Currencies:
Up Down
  • Dollar index
  • GBP/USD
  • USD/CHF
  • USD/INR
  • EUR/USD
  • USD/JPY
  • AUD/USD
  • NZD/USD
  • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Sugar
    • Coffee
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.577%, up from August 20 close of 1.561%;
    • 30-years is at 2.053%, up from 2.044%
    • 2-years yield is at 1.578%, up from 1.508%
    • The 10-Year-&-2-Year spread is at -0.001 down from 0.053
  • VIX
    • Is at 15.81 up from August 21 close of 15.80 ; declining since August 15; below 5-day SMA 16.89
    • 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 2918.26, 2909.75 and 2899.60
  • Critical resistance levels for S&P 500 are 2928.73, 2943.31 and 2964.45
  • Key levels for eMini futures: break above 2935.50, the high of 3:30 AM and break below 2918.50, the low of 5:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future closed at 2924.75 and the index closed at 2924.43 – a spread of about +0.25 points; futures closed at 2929.25 for the day; the fair value is -4.50
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +3.75; Dow by +41 and NASDAQ by +10.25

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 120-Min:Up-Side
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 6-Min: Up-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 16 was a red spinning top candle with small real body, large upper shadow and larger lower shadow.
    • Retracing from the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K is below %D; Bearish Divergence
    • RSI (9) is below 50 after Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was down -29.97 or -1.0%; the 5-week ATR is 88.45
  • Last week’s pivot point=2885.83, R1=2946.16, R2=3003.63; S1=2828.36, S2=276.03; S1 pivot level was breached
  • A down week; third in a row, fourth in last five weeks and fifth 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 like candle above Tuesday’s high; gapped up at the open and made a three-day morning star pattern that did not occur after a decline
    • %K is above %D; near 80
    • RSI-9 above 50
  • At/below 50-day EMA; above 20-day EMA, 100-DAY SMA; above 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Near the upper limit of a horizontal channel; above an uptrend line from August 15 low
    • RSI-21 is near 50
    • %K is below %D but turning up
  • At/above 20-bar EMA, above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving sideways to up since 7:00 PM on August 18; in the upper half of a 40-points channel between 2939.00 and 2899.00
    • RSI-21 is above 50 since 2:30 Am on August 21
    • %K is crossing above %D; near 80
    • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting down since 8:15 PM
  • The Bollinger Band briefly narrowed from 2:30 AM to 3:15 AM; expanding since with price first walked down the lower band and then bounced up to the upper band
  • Stochastic (9, 1, 3): %K is above %D; above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, August 21. Volume traded was mixed though lower than the 10-day average. S&P 500, Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume. NASDAQ Composite and Russell 2000 traded in lower volume.

From Briefing.com:

The S&P 500 increased 0.8% on Wednesday in a broad-based advance. Upbeat results and reassuring guidance from Target (TGT 103.00, +17.47, +20.4%) and Lowe’s (LOW 108.00, +10.13, +10.4%) reinforced the notion that the U.S. consumer remains in good shape, while investors parsed the FOMC minutes from the July meeting.

The Dow Jones Industrial Average increased 0.9%, the Nasdaq Composite increased 0.9%, and the Russell 2000 increased 0.8%.

[…]

All 11 S&P 500 sectors finished in positive territory, with the consumer discretionary (+1.8%) and information technology (+1.2%) sectors gaining over 1.0%. The consumer staples (+0.3%) and communication services (+0.4%) sectors rose modestly.

Price action was relatively muted leading up to the release of the FOMC Minutes, which had a noticeable effect on the U.S. Treasury market.

[…]

The 2-yr yield increased six basis points to 1.57%, and the 10-yr yield increased two basis points to 1.58%. At one point before the close, the 2s10s spread briefly inverted again. The U.S. Dollar Index increased 0.1% to 98.29. WTI crude declined 0.9%, or $0.53, to $55.65/bbl.

[…]

• Existing home sales increased 2.5% month-over-month in July to a seasonally-adjusted annual rate of 5.42 million (Briefing.com consensus 5.40 million) from an upwardly revised 5.29 million (from 5.27 million) in June. Total sales were 0.6% higher than the same period a year ago.
o The key takeaway from the report is that the inventory of existing homes for sale remains tight. That will continue to support high prices, which in turn makes the persistence of low mortgage rates extremely important as a driver of existing home sales activity.
• The weekly MBA Mortgage Applications Index declined 0.9% following a 21.7% spike in the prior week.