Morning Notes – Friday March 8, 2019

Directional Bias For The Day:

• S&P Futures are down; moving mostly sideways since 2:00 AM
• Odds are for a down day with elevated volatility – watch for break above 2750.50 for change of fortune
• Key economic data due:
  • Non-Farm Employment Change (est. 180K;prev. 304K ) at 8:30 AM
  • Unemployment Rate (est. 3.9%; prev. 4.0%) at 8:30 AM
  • Average Hourly Earnings (est. 0.3%; prev. 0.1%) at 8:30 AM
  • Building Permits (est. 1.29M; prev. 1.33M) at 8:30 AM
  • Housing Starts (est. 1.19M; prev. 1.08M) at 8:30 AM

Markets Around The World

• Markets in the East closed down
• European markets are lower
• Currencies:
  

  Up	Down
  EUR/USD AUD/USD NZD/USD USD/CAD USD/INR	Dollar index GBP/USD USD/JPY USD/CHF

• Commodities:
  

  Up	Down
  NatGas Gold Silver Platinum Palladium Sugar Cocoa	Crude Oil Copper Coffee Cotton

• Bonds
  • 10-yrs yield is at 2.639%, up from March 7 close of 2.636%;
  • 30-years is at 3.026%, up from 3.025%
  • 2-years yield is at 2.467%, down from 2.483%
  • The 10-Year-&-2-Year spread is at 0.172, up from 0.153

Key Levels:

• Critical support levels for S&P 500 are 2731.23, 2722.61 and 2703.79
• Critical resistance levels for S&P 500 are 2749.74, 2761.02 and 2767.25
• Key levels for eMini futures: break above 2742.75, the high of 3:30 AM and break below 2734.75, the low of 5:00 AM

Pre-Open

• On Thursday, at 4:00 PM, S&P future (January contract) closed at 2749.00 and the index closed at 2748.93 – a spread of about +0.00 points; futures closed at 2750.00 for the day; the fair value is -1.00
• Pre-NYSE session open, futures price action is to the downside – at 7:00 AM, S&P 500 futures were down by -7.00; Dow by -78; and NASDAQ by -12.25

Directional Bias Before Open

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

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

Previous Session

Major U.S. indices closed lower on Thursday March 7 in mostly higher volume. Russell 2000 traded in lower volume. Indices gapped down at the open and the gap was not filled and the trend for the day was decidedly down, though the indices recovered a bit near the end. Most had relatively large red candle with almost no upper shadow and small lower shadow. All haven broken below the low of Monday, when indices made long legged bearish engulfing candles.

From Briefing.com:

The S&P 500 lost 0.8% on Thursday, as a negative economic outlook from the European Central Bank (ECB) helped fuel growth concerns and profit-taking interest. Thursday’s risk-off mindset was made apparent by the underperformance of cyclical sectors and the flight-to-safety trade in the U.S. Treasury market where the 10-yr yield dropped six basis points to 2.64%.

The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 1.1%, and the Russell 2000 lost 0.9%. A technical violation of the S&P 500’s and Nasdaq Composite’s 200-day moving averages also contributed to some selling interest; both closed below that key technical level.

10 of the 11 S&P 500 sectors finished lower with consumer discretionary (-1.4%), financials (-1.1%), and information technology (-0.9%) leading the retreat. Conversely, the utilities sector (+0.3%) was the lone group to finish higher.

The European Central Bank issued a dovish-minded policy stance, which was an acknowledgement of the slowing growth in the eurozone.
The ECB left its key interest rates unchanged, but it also (1) pushed out its guidance for rates to stay at their present level at least through the end of 2019, versus prior guidance of at least through the summer of 2019; and (2) reintroduced a targeted long-term refinancing operation (TLTRO) that will begin in September 2019 and continue through March 2021.

At the same time, the ECB cut its real GDP growth forecast for 2019 to 1.1% from the 1.7% growth forecast it provided as recently as December.

[…]

• Initial claims for the week ending March 2 were low at 223,000 (Briefing.com consensus 224,000), as expected, while continuing claims for the week ending February 23 fell by 50,000 to 1.755 million.
o The key takeaway from the report is that the low level of initial claims is consistent with prior readings that have been consistent with the understanding that labor market conditions remain tight.
• Nonfarm business sector labor productivity increased 1.9% (Briefing.com consensus 1.7%) in the fourth quarter. Unit labor costs increased 2.0% (Briefing.com consensus 1.5%).
o The key takeaway from the report is that the annual average productivity from 2017 to 2018 was a lowly 1.3%, which is below the long-term rate of 2.1% from 1947 to 2018.
• Total outstanding consumer credit increased by $17.0 billion in January (Briefing.com consensus $17.0 billion) after increasing a revised $15.4 billion (from $16.5 billion) in December.
o Once again, credit growth was rooted in nonrevolving debt, like car loans and student loans, while revolving credit (credit cards) expanded at a more muted pace.

• S&P 500 Sectors