Morning Notes – Tuesday February 4, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility
  • Key economic data due:
    • Factory Orders ( 0.7% est.; prev. -0.7% ) at 10;00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3268.44, 3256.71 and 3244.30
  • Critical resistance levels for S&P 500 are 3285.91, 3293.47 and 3300.15
  • Key levels for eMini futures: break above 3296.25, the high of 0:00 AM on January 31 and break below 3277.00, the low of 4:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3247.00 and the index closed at 3248.92 – a spread of about -2.00 points; futures closed at 3245.50 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +42.00; Dow by +369 and NASDAQ by +142.50

Markets Around The World

  • Markets in the East were closed higher;
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Platinum
  • Bonds
    • 10-yrs yield is at 1.591%, up from February 3 close of 1.520%;
    • 30-years is at 2.062%, up from 1.997%
    • 2-years yield is at 1.399%, up from 1.351%
    • The 10-Year-&-2-Year spread is at 0.192 up from 0.169
  • VIX
    • Is at 15.76 down -2.21 from February 3; below 5-day SMA
    • Next high resistance is 21.46, the high of October 2, 2019; the low support is the low was 11.72 on December 26

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend
  • January 2020 was a red shooting star like candle with long upper shadow and almost no lower shadow
    • Stochastic %K turned below %D from above 90
    • RSI-9 is above a downtrend line from January 2018 high; turning down just above 70
    • At the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then
Weekly:
  • The week ending on January 31 was a red candle with very small lower shadow and long upper shadow; gapped down at the open of the week;
    • Above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D; near 50; bearish divergence
    • RSI (9) is dropped below 60; Bearish Divergence with January 2018 level
  • Last week was down -69.95 or -2.1%; the 5-week ATR is 63.20
  • Last week’s pivot point=3244.56, R1=3374.43, R2=3323.35; S1=3195.64, S2=3165.77; S1/S2/S3 pivot levels were breached
  • A second down week; third in last five weeks and third in last ten weeks
  • Near all time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A small green harami candlw with an upper shadow almost equal to the real body and small lower shadow
    • %K is turned up from near zero but below %D
    • RSI-9 is turned up near 40; below 8-day SMA;
  • Below 20-day EMA; at/above 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Moving within a horizontal trading range between 3300.00 and 3230.00; nearing the upper bound
    • RSI-21 is rising since 4:00 PM on January 31 from below 30 to above 70
    • %K is above %D after making a knee pattern at 6:00 PM on Monday
  • Above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 3:30 PM on January 31 in steps; nearing a resistance area around 3300.00
    • RSI-21 is above 40 since Sunday and above 50 since 7:00 PM on Monday
    • %K is crisscrossing %D around 70
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 8:30 PM on Monday
  • The Bollinger Band is relatively stable and large since 8:30 PM
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 70
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday, February 3 in lower volume. Most indices made small green harami candles with relatively large upper shadow and small lower shadows.

From Briefing.com:

The S&P 500 advanced 0.7% on Monday, as investors presumably viewed last week’s drop as a good opportunity to buy the dip. The Nasdaq Composite (+1.3%) and Russell 2000 (+1.1%) outperformed, while the Dow Jones Industrial Average (+0.5%) trailed its peers.

Eight of the 11 S&P 500 sectors posted gains, including the materials (+2.1%), information technology (+1.3%), and communication services (+1.3%) sectors. The latter was aided by shares of Alphabet (GOOG 1485.94, +51.71), which rose 3.6% in front of the company’s earnings report after the close.

The energy sector (-1.3%) remained hampered by falling oil prices ($50.05, -1.53, -3.0%) amid pestering concerns that the coronavirus outbreak will undercut demand for oil. Prices barely reacted to reports that Saudi Arabia will try to convince OPEC+ to agree to large production cuts.

[…]

U.S. Treasuries started the day on a lower note but spent a bulk of intraday action rebounding from session lows. The 2-yr yield increased three basis points to 1.35%, and the 10-yr yield was unchanged at 1.52%. The U.S. Dollar Index rose 0.5% to 97.84.

[…]

• The ISM Manufacturing Index for January jumped to 50.9% (Briefing.com consensus 48.1%) from an upwardly revised 47.8% (from 47.2%) in December. January marked the first reading above 50% in six months.
o The key takeaway from the report is that the manufacturing sector went back into an expansion mode in January, aided by a jump in new orders, production, and new export orders.
• Total construction spending decreased 0.2% m/m in December (Briefing.com consensus +0.5%) on the heels of an upwardly revised 0.7% increase (from +0.6%) in November. Residential spending was up 1.4% m/m and nonresidential spending was down 1.2% m/m.
o The key takeaway from the report is that there was continued strength in new single-family construction (+2.7%), which was the main driver of the pickup in residential spending.

Morning Notes – Monday February 3, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility
  • Key economic data due:
    • Final Manufacturing PMI (51.9 vs. 51.7 est.; prev. 51.7) at 9:45 AM
    • ISM Manufacturing PMI ( 50.9 vs. 48.5 est.; prev. 472. ) at 10:00 AM
    • Construction Spending ( -0.2% vs. 0.35% est.; prev. 0.7%) at 10:00 AM
    • ISM Manufacturing PMI (53.3 vs. 52.0 est.; prev. 51.7) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3242.80, 3238.46 and 3214.68
  • Critical resistance levels for S&P 500 are 3265.72, 3282.33 and 3293.47
  • Key levels for eMini futures: break above 3250.50, the high of 9:00 PM and break below 3232.75, the low of 5:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (March 2020) closed at 3222.50 and the index closed at 3225.52 – a spread of about -1.00 points; futures closed at 3224.00 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +18.00; Dow by +131 and NASDAQ by +59.75

Markets Around The World

  • Markets in the East were closed mostly lower – Hong Kong was up;
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • INR/USD
  • Commodities:
    Up Down
    • Copper
    • Platinum
    • Sugar
    • Cotton
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Palladium
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 1.551%, up from January 31 close of 1.558%;
    • 30-years is at 2.030%, up from 2.015%
    • 2-years yield is at 1.375%, down from 1.323%
    • The 10-Year-&-2-Year spread is at 0.176 down from 0.197
  • VIX
    • Is at 17.43 down -1.41 from January 31; above 5-day SMA
    • Next high resistance is 21.46, the high of October 2, 2019; the low support is the low was 11.72 on December 26

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend
  • January 2020 was a red shooting star like candle with long upper shadow and almost no lower shadow
    • Stochastic %K turned below %D from above 90
    • RSI-9 is above a downtrend line from January 2018 high; turning down just above 70
    • At the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then
Weekly:
  • The week ending on January 31 was a red candle with very small lower shadow and long upper shadow; gapped down at the open of the week;
    • Above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D; near 50; bearish divergence
    • RSI (9) is dropped below 60; Bearish Divergence with January 2018 level
  • Last week was down -69.95 or -2.1%; the 5-week ATR is 63.20
  • Last week’s pivot point=3244.56, R1=3374.43, R2=3323.35; S1=3195.64, S2=3165.77; S1/S2/S3 pivot levels were breached
  • A second down week; third in last five weeks and third in last ten weeks
  • Near all time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A large bearish engulfing candle; lows near the low of January 6
    • %K has again turned below %D from near 50
    • RSI-9 has turned down below 40; below 8-day SMA;
  • Below 20-day EMA; at/above 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Sideways move since 6:00 PM on January 26 between 3293.00 and 3237.00 with a down bias
    • RSI-21 is bouncing from a low near 20 to above 40
    • %K is above %D since 2:00 PM on Friday
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving down since 9:00 PM on Thursday; moving sideways since 7:30 PM on Sunday
    • RSI-21 is moving between 40 and 50
    • %K is crisscrossing %D
  • At/above 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 9:00 PM on Sunday
  • The Bollinger Band is relatively stable since 9:00 PM
  • Stochastic (9, 1, 3): %K is below %D
  • Bias: Side

Previous Session

Major U.S. indices closed sharply lower on Friday, January 31 in higher volume. Most indices made a bearish engulfing candle and broke below a support level created only few days ago like an ABCD down pattern.

For the week, major indices closed lower in higher volume. All S&P sectors except Utilities closed lower. Asian and European markets also closed down for the week.

From Briefing.com:

The stock market sold off to end the week, and month, on growing concerns about the coronavirus and the negative effect it could have on economic growth. The Dow Jones Industrial Average (-2.1%) and Russell 2000 (-2.1%) led the retreat, followed by the S&P 500 (-1.8%) and Nasdaq Composite (-1.6%).

Ten of the 11 S&P 500 sectors finished lower, including six that lost at least 2.0%. The energy sector (-3.2%) bore the brunt of the damage amid the continued weakness in oil prices ($51.58/bbl, -0.60, -1.2%) and the earnings disappointments in Exxon Mobil (XOM 62.12, -2.67, -4.1%) and Chevron (CVX 107.14, -4.26, -3.8%).

[…]

Unsurprisingly, U.S. Treasuries remained on the advance amid the perceived growth concerns that rattled equities. The 2-yr yield fell seven basis points to 1.32%, and the 10-yr yield fell four basis points to 1.52%. The U.S. Dollar Index fell 0.5% to 97.38.

[…]

• Personal income was up 0.2% m/m in December (Briefing.com consensus +0.3%) while personal spending was up 0.3%, as expected. The PCE Price Index was up 0.3% (Briefing.com consensus +0.2%). That left the yr/yr change at 1.6% versus 1.4% in November. The core PCE Price Index was up 0.2%, as expected. That left the yr/yr change at 1.6% versus 1.5% in November.
o he key takeaway from the report is that inflation is still running comfortably below the Fed’s longer-run inflation target of 2.0%, making it clear that the market need not fear a rate hike anytime soon.
• The Q4 Employment Cost Index increased 0.7%, as expected, seasonally adjusted, for the three-month period ending in December 2019 after increasing 0.7% for the three-month period ending in September 2019.
o The key takeaway from the report is that it shows a continuation of moderate growth in compensation costs.
• The final reading for the January University of Michigan Index of Consumer Sentiment showed an upward revision to 99.8 (Briefing.com consensus 99.1) from the preliminary reading of 99.1. The final reading for December was 99.3.
o The key takeaway from the report is that consumer attitudes remained resilient despite a spate of disconcerting items, such as the geopolitical conflict with Iran, the impeachment trial, and the onset of the coronavirus, underscoring that attitudes about employment and income potential are integral to consumer sentiment.
• The Chicago PMI for January fell to 42.9 (Briefing.com consensus 48.7) from a downwardly revised 48.2 reading in January (from 48.9). This was its lowest level since December 2015.