Morning Notes – Wednesday January 9, 2019

/ January 9, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving sideways since 8:00 PM on Tuesday
  • Horizontal channel emerging on 30-minute timeframe – high 2587.25 and low 2575.00
  • Daily and weekly trend is down
  • Odds are for a sideways to down day (from pre-open level) with elevated volatility – watch for break above 2587.25 and break below 2575.00 for clarity
  • Key economic data due:
    • FOMC December Meeting Minutes at 2:00 PM

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/INR
    • Dollar index
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • NatGas
    • Gold
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.750%, up from January 8 close of 2.716%;
    • 30-years is at 3.030%, up from 2.993%
    • 2-years yield is at 2.602%, up from 2.541%
    • The 10-Year-&-2-Year spread is at 0.148, up from 0.126

Key Levels:

  • Critical support levels for S&P 500 are 2554.71, 2546.76 and 2522.13
  • Critical resistance levels for S&P 500 are 2579.82, 2585.29 and 2600.91
  • Key levels for eMini futures: break above 2587.25, the high of 9:30 AM and break below 2575.00, the low of 7:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2574.50 and the index closed at 2574.41 – a spread of about +0.00 points; futures closed at 2572.50 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +10.75; Dow by +117; and NASDAQ by +35.25

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • October 2018 closed sharply lower; broke below previous four months’ lows; only third down month since October 2016; November was a harami spinning top near the lower end of October
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2% – continues; higher highs and higher lows
Weekly:
  • The week ending on January 4 was a green candle with open above previous weeks’ close and the lower shadow reaching nearly the middle of its real body; the three-week morning star pattern is emerging
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D; RSI is moving above 40
    • The index reached below the 50% Fibonacci retracement level – at 2374.98 – from the rally from February 2016 low and reached a low of 2346.58; the 61.8% Fibonacci retracement is near 2251.86
    • During the week of October 22, Stochastics reached the lowest since the week of October 31, 2016; last week RSI reached the lowest since the week on August 15, 2011;
  • Last week was up +46.20 or +1.9% and ATR is 94.11
  • Last week’s pivot point=2504.66, R1=2565.35, R2=2598.77; S1=2471.24, S2=2410.55; No pivot levels were breached;
  • An up week; second in last five weeks and fourth in last ten weeks
  • The break above an ascending triangle in May 2018 is nullified as the price has fallen below its low
  • The break above a down sloping flag on April 24 2017 is also nullified; the 161.8% extension target near 2835.46 was achieved; 100% extension target of a longer flag-pole near 2913.13 is achieved
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018
  • Below 10-week EMA and 39-week SMA; below 89-week SMA (first since June 27, 2016)
  • Downtrend
Daily
  • A relatively small green candle with small upper shadow and long lower shadow
    • ABCD pattern emerged on January 4th; the 61.8% extension target near 2551.00 is achieved; the 100% extension target is near 2617.00
    • %K is above %D and above 90;
    • RSI-14 is above 50
    • Sequence of lower highs and lower lows since October 3, 2018
  • At/above 20-day EMA; below 50-day EMA, below 100-day SMA and 200-day SMA
  • Downtrend
2-Hour (e-mini future)
  • Futures are mostly moving up since 6:00 PM on January 3; the bias since 6:00 PM on December 25 is up; higher highs and higher lows since then
  • RSI-9 is mostly declining since making a high of 79.17 at 10:00 AM on January 7; made couple of bearish divergences; below 60
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving sideways since 8:00 PM on January 8; above a horizontal channel; the 100% extension target near 2588.00 is achieved
  • RSI-9 is declining since midnight from a high of 66.09; made few bearish divergences; below 50
  • 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 to down since 9:30 PM on January 8
  • The band was narrow from midnight to 1:30 AM; expanded slightly after that
  • RSI-9 is moving down from a high of 71.24 at 9:30 PM after making a bearish divergence; below 40
  • Stochastic (9, 1, 3): %K is crisscrossing %D down since 4:30 AM; bouncing off from zero at 6:15 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Tuesday January 8. The volume was mostly lower  than previous day and also lower than 10-day average. Dow Jones Transportation Average traded in higher volume. Major indices are above 20-day EMA. All S&P were up for the day.

From Briefing.com:

The S&P 500 rose 1.0% on Tuesday, notching its third straight day of gains and its fifth in the last six sessions. The benchmark index did succumb to some early selling pressure, though, surrendering an early 1.2% gain. However, the wave of improved investor sentiment — and a buy-the-dip mentality — that has supported the stock market rally thus far in the new year lifted stocks from early lows.

The Dow Jones Industrial Average gained 1.1%, the Nasdaq Composite gained 1.1%, and the Russell 2000 gained 1.5%.

[…]

Buying interest was largely broad-based with 10 of the 11 S&P 500 sectors finishing with gains. The real estate (+1.8%), communication services (+1.6%), industrials (+1.4%), and utilities (+1.3%) groups outperformed the broader market.

[…]

The 2-yr Treasury note yield rose seven basis points to 2.59%, and the 10-yr Treasury note yield rose three basis points to 2.72%. The U.S. Dollar Index increased by 0.3% to 95.92.

[…]

• The NFIB Small Business Optimism Index for December decreased to 104.4 from the prior reading of 104.8 in November
• The November Job Openings and Labor Turnover Survey showed that job openings decreased to 6.888 million from a revised 7.131 million (from 7.079 million) in October
• Total outstanding consumer credit increased by $22.2 billion in November after increasing a downwardly revised $24.9 billion (from $25.4 billion) in October.
o The key takeaway from the report is that the healthy expansion in consumer credit is a good portent for consumer spending activity when matched with good feelings about job security and income growth.

[…]
  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – December) Relative Strength (January) %K vs. %D (January)
Consumer Discretionary Down XLY (X-Over) XLY Cross-Over
Consumer Staples Down XLP SPY (Cross-Under) Below
Energy Down SPY XLE (Cross-Over) Cross-Over
Materials Down XLB XLB Cross-Over
Industrials Down SPY (X-Under) SPY Cross-Over
Finance Down SPY (X-Under) SPY Cross-Over
Technology Down SPY SPY Below
Utility Under Pressure SPY (X-Under) SPY Below
Heath Care Down XLV SPY (Cross-Under) Below
Real Estate Down SPY (X-Under) SPY Below
Telecom Down SPY XTL (Cross-Over) Cross-Over
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