Market Remarks

Morning Notes – Friday June 21, 2019

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; moving sideways to down since 8:30 AM on Thursday
  • The odds are for a sideways to down day – watch for break above 2960.00 and break below 2951.75 for clarity
  • Key economic data due:
    • Flash Manufacturing PMI ( 50.1 vs. 50.5 est. ; prev. 50.5) at 9:45 AM

Markets Around The World

  • Markets in the East closed mostly down – Shanghai and Singapore closed up
  • European markets are mostly lower – Spain and Italy are p
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas (Unch.)
    • Palladium
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
  • Bonds
    • 10-yrs yield is at 2.059%, up from June 20 close of 2.001%;
    • 30-years is at 2.567%, up from 2.527%
    • 2-years yield is at 1.795%, up from 1.785%
    • The 10-Year-&-2-Year spread is at 0.264, down from 0.217

Key Levels:

  • Critical support levels for S&P 500 are 2946.87, 2937.67 and 231.50
  • Critical resistance levels for S&P 500 are 2958.06, 2961.62 and 2973.12
  • Key levels for eMini futures: break above 2960.00, the high of 3:30 AM and break below 2951.75, the low of 6:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2958.50 and the index closed at 2954.18 – a spread of about +4.25 points; futures closed at 2960.00 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -7.50; Dow by -409 and NASDAQ by -28.00

Directional Bias Before Open

  • Weekly: Uptrend under pressure
  • Daily: Uptrend resumed
  • 120-Min: Up-Side
  • 30-Min: Side
  • 15-Min: Side
  • 6-Min: Side-Down

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

Monthly
  • Under Pressure
  • May 2019 was a large Bearish Engulfing candle that closed below the real body of April and March and well into March’s lower shadow; April 2019 was a green candle with almost no upper and lower shadows;
  • 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 June 14 was an almost doji candle with small lower and relatively longer upper shadow following a large bullish engulfing candle with the highest weekly close since the week of May 10
    • Stochastics (9,1, 3): %K is above %D; *=%K above 70
    • RSI (9) is bouncing from just below 40 nearing 60
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up +13.64 or +0.5% and 5-week ATR is 37.27
  • Last week’s pivot point=2890.76, R1=2906.83, R2=2926.69; S1=2870.90, S2=2854.83; no pivot levels were breached
  • An up week; second in last five weeks and fifth in last ten weeks
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018, when a lower swing low of 2346,58; since then the high of 2815.15 is breached but the all time high is not
  • At/below 10-week EMA, above 39-week SMA and 89-week SMA
  • Uptrend under pressure
Daily
  • A small green real bodied candle with small upper shadow and long lower shadow that gapped up at the open
    • %K is above %D above 90
    • RSI-9 is above 70 but below its 8-period MA
    • The sequence of higher highs and higher lows since December 26, 2018 is broken on May 29; the sequence of lower lows and lower highs since May 1 is also broken
  • Above 20-day EMA, 50-day EMA, 100-DAY SMA and 200-day SMA; 100-day SMA crossed is above 200-day SMA after for the first time since January 15 on May 22
  • Uptrend resumed
2-Hour (e-mini future)
  • Moving sideways since 2:00 AM on June 20 near the highs
    • RSI-21 is declining since 6:00 AM on June 20;
    • %K is below %D from above 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving sideways since 3:00 AM on June 20 within a symmetrical triangle near the highs; potential to form a pennant
    • RSI-21 is moving around 50 since 2:30 PM on June 20
    • %K crossed below %D at 5:30 AM
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways to down since 4:45 Pm on June 20
  • The Bollinger Band was relatively narrow from 9:15 PM to 11:00 PM; expanded slightly since with price toggling between upper and lower bands
  • Stochastic (9, 1, 3): %K crisscrossing %D near 30
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Thursday, June 20 in mixed volume. Russell 2000 closed down. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume. S&P 500 made all-time intraday and closing highs. DJIA is close to its highs and NASDAQ Composite and Wilshire 5000 Total Market index are not far from their all time highs. Other has a lot to catch up.

From Briefing.com:

The S&P 500 advanced 1.0% on Thursday, setting a new intraday high and new record close, bolstered by expectations for easier monetary policy and lower sovereign bond yields.

The Dow Jones Industrial Average gained 0.9%, the Nasdaq Composite gained 0.8%, and the Russell 2000 gained 0.5%.

[…]

Expectations for lower rates remained the biggest driver in the equity and bond markets. The 10-yr note yield and the 2-yr note yield declined three basis points each to 1.72% and 2.00%, respectively. The lower yields put some pressure on the U.S. dollar (96.65, -0.47, -0.5%) and continued to favor risk assets.

[…]

The S&P 500 energy sector led all sectors higher with a gain of 2.2%. The other ten sectors finished with gains between 0.4% (health care) and 1.6% (industrials). The turnaround in the S&P 500 financials sector (+0.5%), which was down as much as 0.6% during the day, contributed to the strong finish in the broader market.

[…]

• Initial claims for the week ending June 15 decreased by 6,000 to 216,000 (Briefing.com consensus 220,000). Continuing claims for the week ending June 8 decreased by 37,000 to 1.662 million.
o The key takeaway from the report is that it covers the period in which the survey for the June employment report was conducted. Accordingly, the low level of initial claims should set an expectation for a solid gain in nonfarm payrolls for June.
• The Conference Board’s Leading Economic Index was unchanged in May (Briefing.com consensus +0.1%) following a downwardly revised 0.1% increase (from 0.4%) in April.
o The key takeaway from the report is that it reflects an environment of slower economic growth unfolding in the second quarter. According to the Conference Board, the Leading Economic Index increased 0.3% for the six-month period ending May 2019, versus 2.2% growth during the previous six months.
• The Q1 Current Account Deficit was $130.4 billion (Briefing.com consensus -$125.0 billion) versus a downardly revised $143.9 billion (from -$134.4 billion) for the fourth quarter.
• The Philadelphia Fed Index fell to 0.3 (Briefing.com consensus 11.5) from 16.6 in May.

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