Morning Notes – Friday August 23, 2019

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideways too an up day – watch for break below 2918.75 and break above 2929.75 for change of fortune
  • Key economic data due:
    • New Home Sales ( 645K est. ; prev. 646K) at 10:00 AM
    • Fed Chair Powell Speech at 10:00 AM
  • 9:00 AM Update:
    • The sentiments have turned negative following China’s plans for retaliatory tariffs on U.S. goods;
    • The low of Thursday, 2904.25, has been breached though futures have bounced up from that level but  it has become the new critical support level;
    • The support of 2899.60, the low of August 20, has become relevant for the index; next relevant level following that is 2882.60
    • The bias for the day is now decidedly down

Markets Around The World

    • Markets in the East closed mostly up – Seoul and Singapore were down
    • European markets are higher
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • NZD/USD
  • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • USD/INR

 

  • Commodities:
    Up Down
    • Silver
    • Copper
    • Sugar
    • Coffee (unch.)
    • Cotton
    • Cocoa (unch.)
    • Crude Oil
    • NatGas
    • Gold
    • Platinum
    • Palladium
  • Bonds
    • 10-yrs yield closed at 1.610%, up from August 21 close of 1.577%;
    • 30-years is at 2.102%, up from 2.053%
    • 2-years yield is at 1.622%, up from 1.578%
    • The 10-Year-&-2-Year spread is at -0.012 up from -0.001
  • 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 2921.91, 2914.41 and 2904.51
  • Critical resistance levels for S&P 500 are 2932.35, 2939.08 and 2943.31
  • Key levels for eMini futures: break above 2936.75, the high of 2:00 AM and break below 2927.00, the low of 6:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future closed at 2923.25 and the index closed at 2922.95 – a spread of about +0.25 points; futures closed at 2922.25 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 7:30 AM, S&P 500 futures were up by +11.00; Dow by +94 and NASDAQ by +35.00

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 120-Min:Up-Side
  • 30-Min: Side
  • 15-Min: Side
  • 6-Min: Side

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 red spinning top candle; the real body completely engulfed the previous day’s real body
    • %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 crossing below %D from 80
  • At/below 20-bar EMA, at/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 moving around 50
    • %K is crossing above %D; near 30
    • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 0:00 AM
  • The Bollinger Band is relatively narrow
  • Stochastic (9, 1, 3): %K is above %D; near 80
  • Bias: Side

Previous Session

Major U.S. indices mostly closed down on Thursday, August 22 in mostly higher volume. Dow Jones Industrial Average closed higher and Russell 2000 traded in lower volume. The volume traded was lower than the 10-day average.

From Briefing.com:

The stock market finished mixed on Thursday, as weak U.S. manufacturing data and reservations from a few Fed officials contributed to some indecisiveness. The S&P 500 (-0.1%), Nasdaq Composite (-0.4%), and Russell 2000 (-0.3%) declined modestly, while the Dow Jones Industrial Average (+0.2%) managed to finish higher.

[…]

Today’s events also had a noticeable effect on the U.S. Treasury market, where the 2-yr yield briefly rose above the 10-yr yield multiple times during the day. Both yields finished three basis points higher at 1.60% and 1.61%, respectively. WTI crude declined 0.7%, or $0.37, to $55.28/bbl.

[…]

• Initial jobless claims decreased by 12,000 to a very low 209,000 (Briefing.com consensus 218,000) for the week ending August 17. Continuing claims fell by 54,000 to 1.674 million for the week ending August 10.
o The key takeaway from the report was that it covered the period in which the survey for the August employment report was conducted. Accordingly, the very low level of initial claims should feed expectations for another solid increase in nonfarm payrolls.
• The Conference Board’s Leading Economic Index (LEI) increased 0.5% in July (Briefing.com consensus +0.2%) following an upwardly revised 0.1% decline (from -0.3%) in June. The key takeaway from the report is that it reflected a slower growth environment, evidenced by five of the ten components failing to make a positive contribution to the overall increase.