Morning Notes – Tuesday August 27, 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 2869.25 for change of fortune
  • The 61.8% Fibonacci retracement of the big decline on Friday – from 2936.50 to 2810.25 – is achieved near 2888.00; the 78.6% Fibonacci retracement is near 2909.00 after a resistance level near 2901.00
  • Key economic data due:
    • HPI ( 0.2% vs. 0.2% est.; prev. 0.2%) at 9:00 AM
    • S&P/CS Composite-20 HPI (2.1% vs. 2.5% est.; prev. 2.4% ) at 9:00 AM
    • CB Consumer Confidence ( est. 129.3; prev. 135.7) at 10:00 AM
    • Richmond Manufacturing Index ( est. -2; prev. -12) 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 – Hong Kong was down
    • European markets are higher
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • AUD/USD
  • NZD/USD
  • USD/CAD
  • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • USD/CHF

 

  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
    • NatGas
    • Coffee
  • Bonds
    • 10-yrs yield closed at 1.503%, down from August 23 close of 1.528%;
    • 30-years is at 1.988%, down from 2.025%
    • 2-years yield is at 1.539%, up from 1.527%
    • The 10-Year-&-2-Year spread is at -0.036 down from 0.001
  • VIX
    • Is at 18.93 down from August 26 close of 19.32, which was red down candle; Above 5-day SMA 18.12
    • Recent high was 24.10 on August 15; recent low was 15.51 on August 21

Key Levels:

  • Critical support levels for S&P 500 are 2866.84, 2864.41 and 2856.00
  • Critical resistance levels for S&P 500 are 2901.70, 22905.89 an d2913.19
  • Key levels for eMini futures: break above 2897.00, the high of 9:00 AM and break below 2869.25, the low of 3:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future closed at 2879.50 and the index closed at 2878.38 – a spread of about +1.00 points; futures closed at 2883.25 for the day; the fair value is -3.75
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +12.00; Dow by +104 and NASDAQ by +46.75

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 120-Min:Side-Up
  • 30-Min: Up-Side
  • 15-Min: Side
  • 6-Min: Side-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 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 small green harami candle within a large red candle;
    • %K is below %D but rising
    • RSI-9 turning up 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 on Sunday from near 200-day SMA; bouncing up from the lower bound of a horizontal channel between 2810.00 and 2940.00; near the middle of the channel
    • RSI-21 has risen from near 10 to just above 60
    • %K is above %D near 80
  • Above 20-bar EMA, below  EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving sideways to up since 4:30 AM on August 26; breaking above the upper resistance near 2888.50;
    • RSI-21 is rising after flattening; just above 60
    • %K is crisscrossing %D above 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 moving sideways since 7:45 AM on Monday
  • The Bollinger Band was relatively narrow from 9:30 PM to 6:00 AM; expanding since wit price walking up the upper band
  • Stochastic (9, 1, 3): %K is crossing %D near 80
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Monday, August 26 in volume lower than previous day and the 10-day average. Most indices made small harami pattern with large red candle.

From Briefing.com:

The stock market rebounded more than 1% on Monday, catalyzed by President Trump’s contention that China called top U.S. negotiators to restart trade talks. The S&P 500 advanced 1.1%, which was comparable to the gains in the Dow Jones Industrial Average (+1.1%), Nasdaq Composite (+1.3%), and Russell 2000 (+1.1%). Most of the price action occurred before the open, but the market was able to close near session highs.

[…]

U.S. Treasuries finished the day lower, giving up an overnight rally following President Trump’s trade comments. The 2-yr yield increased two basis points to 1.55%, and the 10-yr yield increased one basis point to 1.55%. The U.S. Dollar Index advanced 0.4% to 98.07. WTI crude lost 0.9% to $53.70/bbl on speculation that a possible U.S.-Iran meeting could lead to oversupply.

[…]

• Durable goods orders increased 2.1% (Briefing.com consensus +1.2%) following a downwardly revised 1.8% increase (from 2.0%) in June. Excluding transportation, durable goods orders decreased 0.4% (Briefing.com consensus +0.1%) following a downwardly revised 0.8% increase (from 1.2%) in June.
o The key takeaway from the report is that orders for nondefense capital goods, excluding aircraft — a proxy for business investment — increased 0.4% in July on the heels of a 0.9% increase in June. Shipments, though, dropped 0.7%, which is a component that will factor into Q3 GDP forecasts.