Market Remarks

Morning Notes – Friday July 19, 2019

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; mostly moving sideways near 3000.00 since 6:00 PM on Thursday after bouncing  from lows near 2975.00
  • The odds are for an day – watch for break below 2996.25 for change of fortune
  • Key economic data due:
    • Prelim UoM Consumer Sentiment ( est. 98.6; prev. 98.2 ) at 10:00 AM
    • Prelim UoM Inflation Expectations ( prev. 2.7% ) at 10:00 AM

Markets Around The World

    • Markets in the East closed mostly higher – Mumbai closed down
    • European markets are mixed – Germany, U.K., France and STOXX 600 are up; Spain, Italy and Switzerland are down
    • Currencies:
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
      Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 2.038%, down from July 17 close of 2.061%;
    • 30-years is at 2.568%, down from 2.573%
    • 2-years yield is at 1.752%, down from 1.826%
    • The 10-Year-&-2-Year spread is at 0.286, up from 0.235

Key Levels:

  • Critical support levels for S&P 500 are 2990.02, 2980.09 and 2974.37
  • Critical resistance levels for S&P 500 are 2998.28, 3009.53 and 2017.80
  • Key levels for eMini futures: break above 3008.50, the high of 4:00 AM and break below 2997.50, the low of 7:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2997.50 and the index closed at 2995.11 – a spread of about +2.50 points; futures closed at 2997.50 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures are higher – at 7:30 AM, S&P 500 futures were up by +5.25; Dow by +80 and NASDAQ by +17.00

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • June 2019 was a large green Piercing or Bullish Engulfing candle that closed near the open of previous week;
  • 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 July 12 was a green candle with almost no upper shadow and small lower shadow; made all time intra-day and closing high
    • At the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K and %D are above 90; potential Bearish Divergence for %D
    • RSI (9) is rising and above 65; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up +23.36 or +0.8% and 5-week ATR is 52.19
  • Last week’s pivot point=2997.04, R1=3030.65, R2=3047.52; S1=2980.17, S2=2946.56; R1 pivot level was breached
  • An up week; fourth in last five weeks and fifth 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
  • Above 10-week EMA, 39-week SMA and 89-week SMA
  • Uptrend resumed
Daily
  • A green piercing candle with very almost no upper and small lower shadows;
    • %K turning up but is still below %D
    • RSI-9 is turning up just above 60
    • Sequence of higher highs and higher lows since June 3
  • Above 20-day EMA, 50-day EMA, 100-DAY SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Moving up since 10:00 AM on July 18; moving sideways since 4:00 PM on July 18
    • RSI-21 is moving along 60
    • %K crisscrossing %D around 80
    • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways since 6:00 PM on July18 near 3000 after bouncing from 2near 2975 at 11:0 #) AM
    • RSI-21 declined from above 65 to just above 50
    • %K crossed above %D at 7:00 AM
    • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways since 8:15 PM
  • The Bollinger Band was relatively narrow from 1:15 AM to 5:15 AM; expanding slightly since with price walking down the lower band
  • Stochastic (9, 1, 3): %K crossed above %D at 7:00 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Thursday, July 18 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. The indices first rose and then declined to make day’s lows before noon and then turned around and closed higher..

From Briefing.com:

The S&P 500 overcame a sluggish start to increase by 0.4% on Thursday, as dovish Fed commentary bolstered expectations for aggressive monetary policy. In addition, mostly positive reactions to earnings reports helped provide support for the market.

The Nasdaq Composite and the Russell 2000 both increased 0.3%. The Dow Jones Industrial Average finished flat, pressured by losses in shares of Boeing (BA 361.11, -8.41, -2.3%) and UnitedHealth (UNH 260.60, -6.05, -2.3%) with UNH unable to gain on positive earnings results.

[…]

Lower rates, which were seen across the U.S. Treasury yield curve, should continue to favor risk assets. The fed-funds sensitive 2-yr yield declined five basis points to 1.78%, and the 10-yr yield declined two basis points to 2.04%. The U.S. Dollar Index lost 0.5% to 96.69.

Overall, the gains were modest, but the S&P 500 consumer staples (+0.8%), financials (+0.8%), information technology (+0.8%), and utilities (+0.8%) sectors did gain 0.8% apiece. The communication services sector (-0.9%) was a drag on the market, as shares of Netflix (NFLX 325.21, -37.23) fell 10.3% after disappointing investors with a miss on net subscriber additions.

Notable standouts on Thursday included Union Pacific (UNP 174.25, +9.70, +5.9%) and Taiwan Semi (TSM 43.19, +1.56, +3.8%) after both provided upbeat earnings results and commentary, helping fuel the gains in the Dow Jones Transportation Average (+1.3%) and Philadelphia Semiconductor Index (+1.5%). The transportation average, however, only recouped some of yesterday’s 3.6% decline.

[…]

Separately, oil prices fell for the sixth straight session on Thursday. WTI crude settled 2.8% lower at $55.19/bbl but finished on a high note after President Trump said the U.S. Navy defensively shot down an Iranian drone near the Strait of Hormuz.

[…]

• Initial claims for the week ending July 13 increased by 8,000, yet they remain at a very low level of 216,000 (Briefing.com consensus 215,000). Continuing claims for the week ending July 6 dropped by 42,000 to 1.686 million.
o The key takeaway from the report is that it covers the period in which the survey for the July employment report is conducted. The low level of initial claims during the survey week will underpin economists’ expectations for another solid increase in nonfarm payrolls.
• The Conference Board’s Leading Economic Index declined 0.3% in June (Briefing.com consensus 0.0%) following an unchanged reading for May. The 0.3% decline is the first decline since December 2018 and the largest decline since January 2016.
o The key takeaway from the report is that it suggests growth is apt to remain slow in the second half of the year, according to the Conference Board.
• The Philadelphia Fed Index sprung back to life with a 21.8 reading for July (Briefing.com consensus 5.0) that was well ahead of the 0.3 reading for June. The dividing line between expansion and contraction is 0.0.

 

 

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