Morning Notes – Monday March 25, 2019

Directional Bias For The Day:

• S&P Futures are lower; moving  up since 2:30 AM;
• Odds are for a down day with elevated volatility  – watch for break above 2810.25 for change of fortune
• No key economic data due:

Markets Around The World

• Markets in the East closed down
• European markets are mixed – Germany, U.K and TOXX 600 are down; France, Spain, Italy and Switzerland are up
• Currencies:
  

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

• Commodities:
  

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

• Bonds
  • 10-yrs yield is at 2.451%, down from March 22 close of 2.455%;
  • 30-years is at 2.892%, up from 2.889%
  • 2-years yield is at 2.287%, down from 2.329%
  • The 10-Year-&-2-Year spread is at 0.164, down from 0.126

Key Levels:

• Critical support levels for S&P 500 are 2798.32, 2787.84 and 2784.00
• Crtical resistance levels for S&P 500 are 2811.85, 2823.28 and 2839.04
• Key levels for eMini futures: break above 2810.25, the high of 6:30 AM and break below 2801.50, the low of 8:00 AM

Pre-Open

• On Friday, at 4:00 PM, S&P future (June contract) closed at 2806.00 and the index closed at 2800.71 – a spread of about +5.25 points; futures closed at 2810.75 for the day; the fair value is -4.50
• Pre-NYSE session open, futures price action is to the downside – at 9:15 AM, S&P 500 futures were down by -8.00; Dow by -68 and NASDAQ by -28.75

Directional Bias Before Open

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

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

Previous Session

Major U.S. indices closed sharply lower on Friday, March 22 in higher volume.  Major indices made bearish engulfing and effectively reversed the Thursday’s bullish engulfing.

For the week, major U.S. indices closed down in mostly higher volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume. NASDAQ Composite and S&P 500 made inverted hammer for the week. Most made large red candle with long upper shadow and almost no lower shadow.

From Briefing.com:

The S&P 500 dropped 1.9% on Friday, as weak manufacturing data out of Europe added to worries about the pace of global economic activity. Growth concerns were reflected by another drop in U.S. Treasury yields, the underperformance of the cyclical sectors, and a pullback in oil prices ($59.01/bbl, -$0.94, -1.6%). Friday’s decline sent the S&P 500 back to the 2800 level.

The Dow Jones Industrial Average lost 1.8% and the Nasdaq Composite lost 2.5%. The domestically-oriented Russell 2000 lost 3.6%, pressured by concerns that global economic weakness will catch up to the U.S. sooner rather than later.

Ten of the 11 S&P 500 sectors finished lower, led by materials (-3.0%), financials (-2.8%), and energy (-2.6%). Conversely, the utilities sector (+0.7%) was the lone group to finish higher.

Germany’s Manufacturing PMI fell to 44.7 from 47.6 in February, serving as a reminder that output in a major export center remains weak. France’s Manufacturing PMI (actual 49.8; prior 51.5) fell below 50.0, which indicated that the country’s manufacturing sector was also in contraction.

The weak data sent investors flocking to safe-haven bonds, which drove the yield on the 10-yr German bund (-0.011%) into negative territory for the first time since 2016. The lower yields in Europe likely contributed to increased buying interest in U.S. Treasuries, which helped drive yields even lower.

The 2-yr yield dropped eight basis points to 2.32%, and the 10-yr yield dropped eight basis points to 2.46%. Strikingly, the spread between the 3-month yield (2.45%) and the 10-yr yield briefly inverted for the first since 2017. Like Treasuries, the dollar benefited from the flight to safety, lifting the U.S. Dollar Index 0.2% to 96.65.

[…]

• Existing home sales increased 11.8% month-over-month in February to a seasonally-adjusted annual rate of 5.51 million (Briefing.com consensus 5.10 million) from a downwardly revised 4.93 million (from 4.94 million) in January. Total sales were 1.8% lower than the same period a year ago.
o The key takeaway from the report is that while sales rebounded sharply on a month-over-month basis, they are still tracking below levels seen one year ago.
• Wholesale inventories increased 1.2% in January on top of a 1.1% increase in December. Wholesale sales were up 0.5% following an upwardly revised 0.9% decrease (from -1.0%) in December.
o The key takeaway from the report is that inventory growth continued outpacing sales growth, which should keep pressure on prices.
• The Treasury Budget for February showed a deficit of $233.98 billion versus a deficit of $215.24 billion for the same period one year ago. The Treasury Budget is not seasonally adjusted, so the February deficit cannot be compared to the $8.7 billion surplus for January.
o The fiscal year-to-date deficit is $544.23 billion versus a deficit of $390.96 billion for the same period ago. The budget deficit over the last 12 months is $932.27 billion.

• S&P 500 Sectors