Market Remarks

Morning Notes – Tuesday August 13, 2019

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day with elevated volatility – watch for break above 2880.75 and 2883.25 for change of fortune
  • Key economic data due:
    • CPI (0.3% vs. 0.3% est.; prev. 0.1%) at 8:30 AM
    • Core CPI (0.3% vs. 0.2% est.; prev. 0.3%) at 8:30 AM

Markets Around The World

    • Markets in the East closed down
    • European markets are lower
    • Currencies:
Up Down
  • Dollar index
  • GBP/USD
  • AUD/USD
  • USD/CAD
  • USD/INR
  • EUR/USD
  • USD/JPY
  • USD/CHF
  • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Sugar
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.639%, down from August 9 close of 1.734%;
    • 30-years is at 2.130%, down from 2.248%
    • 2-years yield is at 1.588%, down from 1.637%
    • The 10-Year-&-2-Year spread is at 0.051, down from 0.097
  • VIX
    • Is at 21.39 up from August 12 close of 21.09; Above 5-day SMA 19.37
    • Recent high was 24.81 on August 5; recent low was 11.69 on July 25

Key Levels:

  • Critical support levels for S&P 500 are 2873.14, 2861.34 and 2846.84
  • Critical resistance levels for S&P 500 are 2883.13, 2902.55 and 2907.07
  • Key levels for eMini futures: break above 2880.75, the high of 7:00 AM and break below 2866.75, the low of 5:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future closed at 2883.50 and the index closed at 2883.09 – a spread of about +0.50 points; futures closed at 2880.25 for the day; the fair value is +3.25
  • Pre-NYSE session open, futures are lower – at 8:00 AM, S&P 500 futures were down by -8.25; Dow by -77 and NASDAQ by -29.75

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • July formed a shooting star type doji at all time highs
    • Stochastic is forming a Bearish Divergence
    • RSI-9 is below a downtrend line from January 2018 high; forming a Bearish Divergence
  • June 2019 was a large green Piercing or Bullish Engulfing candle that closed near the open of previous week; May was large Bearish Engulfing candle that closed near the lows
  • 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 August 9 was a small green candle near the lows of last week with an upper shadow equal to the real body and a lower shadow equal to five times the real body
    • Retracing from the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K is below %D; Bearish Divergence
    • RSI (9) is near 50; Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was down -13.40 or -0.5%; the 5-week ATR is 74.98,
  • Last week’s pivot point=2893.16, R1=2964.21, R2=3009.76; S1=2847.61, S2=2776.56; S1/S2 pivot levels were breached
  • A down week; third in last five weeks and fourth 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
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A relatively large red candle that gapped down at the open; almost no upper shadow and small lower shadow
    • %K crossed below %D
    • RSI-9 is turning down; below 40
  • Below 20-day EMA, 50-day EMA and 100-DAY SMA; above 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Moving down since 10:00 AM on August 8; breaking below an uptrend line from August 5 lows
    • RSI-21 moving down since 2:00 PM on August 8 from above 75 to below 30
    • %K is crisscrossing %D near 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Mostly moving down since 12:00 PM on August 8; in the congestion zone that it broke above few days ago
    • RSI-21 declined from above 70 at 12:30 PM on August 8 to below/around 40
    • %K is below %D near 50
    • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 6:30 AM on August 12
  • The Bollinger Band narrowed from 7:45 PM to 2:00 AM; expanding since with price first walking down the lower band and then bouncing to the middle band
  • Stochastic (9, 1, 3): %K is below %D since 7:00 AM
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Monday, August 12. The volume traded was lower than that on Friday and the 10-day average. Most indices gapped down from the previous red harami candle and closed below Thursday’s big green candle.

From Briefing.com:

The stock market fell more than 1% on Monday, as uncertainties about the global economy continued to push investors away from risk assets and into safe-haven assets like U.S. Treasuries and gold. The S&P 500 fell 1.2%, which was comparable to the declines in the Nasdaq Composite (-1.2%) and Russell 2000 (-1.2%). The Dow Jones Industrial Average lost 1.5%.

[…]

This compression in yields not only hit investor sentiment but was also affected the S&P 500 financials sector (-1.9%), which led all 11 S&P 500 sectors in losses. Banks typically rely on healthy net interest margins to boost profit and facilitate lending activity. The other rate-sensitive sectors — real estate (-0.3%) and utilities (-0.3%) — outperformed but still finished lower.

The spread between the 2-yr and 10-yr yields narrowed to six basis points, as demand for longer-dated tenors continued to climb amid growth concerns. The 2-yr yield fell five basis points to 1.58%, and the 10-yr yield fell ten basis points to 1.64%. The U.S. Dollar Index declined 0.1% to 97.43.

[…]

• The Treasury Budget for July showed a deficit of $119.70 bln (Briefing.com consensus -$100.00 bln) versus a deficit of $76.87 bln for the same period one year ago. The Treasury Budget is not seasonally adjusted, so the July deficit cannot be compared to the $8.50 bln deficit in June.
o The fiscal year-to-date deficit is $866.81 bln versus a deficit of $683.96 bln in the same period a year ago. The budget deficit over the last 12 months is $961.8 bln, versus $919 bln for the 12 months ending in June.

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