Morning Notes – Monday August 26, 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 2863.50 for change of fortune
  • Key economic data due:
    • Durable Good ( 2.1% vs. 1.4% est.; prev. 1.9%) at 8:30 AM
    • Core Durable Goods (-0.4% vs. 0.2% est.; prev. 1.0% ) at 8:30 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 down – Mumbai are up
    • European markets are mixed – Germany, France, Spain and Italy are up; U.K., Switzerland and STOXX 600 are down
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • AUD/USD
  • USD/CAD
  • USD/INR
    • EUR/USD
    • GBP/USD
    • NZD/USD

 

  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.528%, down from August 22 close of 1.610%;
    • 30-years is at 2.020%, up from 2.102%
    • 2-years yield is at 1.527%, up from 1.622%
    • The 10-Year-&-2-Year spread is at 0.001 up from -0.012
  • VIX
    • Is at 19.90 up from August 23 close of 19.87 but below its open; Above 5-day SMA 17.95
    • 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 2857.95, 2848.45 and 2834.97
  • Critical resistance levels for S&P 500 are 2876.49, 2890.90 and 2901.70
  • Key levels for eMini futures: break above 2888.50, the high of 5:30 AM and break below 2863.50, the low of 5:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future closed at 2847.75 and the index closed at 2847.11 – a spread of about +0.50 points; futures closed at 2855.50 for the day; the fair value is -7.75
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +18.50; Dow by +221 and NASDAQ by +56.50

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-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 23 was a large red Bearish Engulfing with small shadows
    • Retracing from the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K is below %D; falling near 30
    • RSI (9) is near 40 and falling
  • Last week was down -41.57 or -1.4%; the 5-week ATR is 100.33
  • Last week’s pivot point=2873.72, R1=2912.47, R2=2997.83; S1=2808.36, S2=2769.61; No pivot levels were breached
  • A down week; fourth in a row and fourth in last five weeks and sixth 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
  • Below 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A large red candle with small shadows
    • %K is below %D; below 20 80
    • RSI-9 near 40
  • 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 gap-down open for the week from near 200-day SMA; bouncing up from the lower bound of a horizontal channel between 2810.00 and 2940.00
    • RSI-21 has risen from near 10 to just below 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 up since 6:00 PM in steps
    • RSI-21 is flattening just above 50
    • %K is crossing above %D but turning down
    • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 6:30 AM
  • The Bollinger Band is narrowing since 7:30 AM
  • Stochastic (9, 1, 3): %K is crossing below %D; near 60
  • Bias: Up-Side

Previous Session

Major U.S. indices closed down on Friday, August 23 in higher volume, which was also higher than 10-day average. For the week major indices closed down in lower volume. All S&P sectors except Consumer Discretionary and Utility were down for the week.

From Briefing.com:

The stock market sold off on Friday after President Trump ordered companies to find an alternative to China in response to Beijing announcing retaliatory tariffs against the U.S. The S&P 500 (-2.6%) and Dow Jones Industrial Average (-2.4%) lost around 2.5%, while the Nasdaq Composite (-3.0%) and Russell 2000 (-3.1%) lost at least 3.0%.

[…]

A steady broad-based retreat transpired during the day amid worries that escalated trade tensions will exacerbate slowing global growth and, by extension, affect corporate earnings. All 11 S&P 500 sectors finished in negative territory, which saw the energy (-3.4%) and information technology (-3.3%) sectors losing over 3%. The utilities sector (-1.1%) declined the least.
[…]

The 2-yr yield dropped seven basis points to 1.53%, and the 10-yr yield dropped eight basis points to 1.53%. The U.S. Dollar Index fell 0.5% to 97.73. WTI crude fell 2.0%, or $1.12, to $54.16/bbl.

[…]

• New home sales declined 12.8% m/m to a seasonally adjusted annual rate of 635,000 (Briefing.com consensus 645,000) from an upwardly revised 728,000 (from 646,000) in June. New home sales were up 4.3% yr/yr.
o The key takeaway from the report is that there was a big upward revision for June, yet there was no follow-through in July despite low mortgage rates and lower median sales prices. Sales were down big in three of the four regions and the total number of new homes sold was still below the originally reported 646,000 increase for June.