Morning Notes – Wednesday January 30, 2019

/ January 30, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 2:30 PM; breaking above an ascending triangle on 30-minute chart
  • Daily and weekly trends are down
  • Odds are for an up day with elevated volatility – watch for break below 2644.75 for change of fortunes
  • Key economic data due:
    • ADP Non-Farm Employment Change (est. 180K; prev. 271K) at 8:15 AM
    • Pending Home Sales (est. 0.8%; prev. -0.7%) at 10:00 AM
    • FOMC Statement; Fed Funds Rate at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Mumbai and Singapore closed down; Hong Kong, Sydney and Seoul were up
  • European markets are mixed – Germany, Spain and Switzerland are down; U.K., France, Italy and STOXX 600 are up
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • NatGas
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.725%, up from January 29 close of 2.712%;
    • 30-years is at 3.042%, up from 3.041%
    • 2-years yield is at 2.585%, down from 2.595%
    • The 10-Year-&-2-Year spread is at 0.144, up from 0.135

Key Levels:

  • Critical support levels for S&P 500 are 2634.21, 2631.05 and 2624.06
  • Critical resistance levels for S&P 500 are 2650.93, 2658.75 and 2669.12
  • Key levels for eMini futures: break above 2654.25, the high of 7:00 AM on January 28 and break below 2644.75, the low of 5:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2638.75 and the index closed at 2640.00 – a spread of about -1.25 points; futures closed at 2640.25 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures price action is to the upside – at 7:15 AM, S&P 500 futures were up by +10.00; Dow by +110; and NASDAQ by +61.25

Directional Bias Before Open

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

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 25 was a small green candle with long lower shadow and small upper shadow; the high was below previous week’s high and week’s low reached near previous week’s middle; approaching the downtrend line, which may act as a resistance
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D; RSI is moving up and is near 50
    • The index is nearing the 61.8% retracement of the decline from the high in early October 2018
    • 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 down -5.95 or -0.2% and ATR is 59.52
  • Last week’s pivot point=2650.00, R1=2687.14, R2=2709.52; S1=2627.62, S2=2590.48; no pivot levels were breached;
  • A down week; first after four up weeks; first in last five weeks and fifth 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 small red spinning top candle that mostly stayed near previous day’s close and high; just below the downtrend line from October 2018 high
    • %K again crossed below %D after rising above 80;
    • RSI-14 is turned down from near 60; RSI-9 turned down from above 70 and is showing a failure swing top
    • Sequence of lower highs and lower lows since October 3, 2018
  • Above 20-day EMA and 50-day EMA, below 100-day SMA and 200-day SMA
  • Downtrend Paused
2-Hour (e-mini future)
  • Moving mostly sideways since 2:00 PM on January 17; the rounding pattern that was emerging since January 18 has fizzled;
  • RSI-9 rising from a low of 22.3 at 10:00 AM on January 28; formed a failure swing bottom but the price has moved only sideways
  • At/above 20-bar EMA; at/below EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Drifting higher since 12:00 PM on January 28; mostly moving sideways since 7:30 Am on January 29
    • an ascending triangle is emerging since 8:00 AM on January 28; a break above 2650.00 will complete the triangle; the 61.8% extension target is near 2667.25 and the 100% extension target is near 2677.75
  • RSI-9 mostly between 40 and 65 since 1:00 PM on January 28 with occasional foray above and below the range; above 65
  • Above recently rising 20-bar EMA, which is above a flat EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting up since 11:45 PM on January 28
  • The band was relatively narrowed from 11:45 PM to 1:45 AM; expanding since; price mostly moving around the upper band since 3:45 AM
  • RSI-9 is moving mostly between 40 and 65 since 1:00 PM on January 28 with few moves above and below;
  • Stochastic (9, 1, 3): %K is crisscrossing %D above 80 3:00 AM
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Tuesday January 29 in lower volume. Dow Jones Industrial Average, Dow Jones Transportation Average and NUSE Composite closed higher. S&P 500, NASDAQ Composite, Russell 2000 and Wilshire 5000 Total Market Index closed down. The day’s range was small and most made small spinning top candlestick lines.

From Briefing.com:

Wall Street closed on a mixed note on Tuesday, with the S&P 500 losing 0.2%, ahead of a big batch of earnings reports. The market has heard its share of guidance cuts during the Q4 earnings season so far, which presumably led investors to employ some caution in front of Apple’s (AAPL 154.68, -1.62, -1.0%) report after Tuesday’s close.

The blue-chip Dow Jones Industrial Average gained 0.2%, the tech-sensitive Nasdaq Composite lost 0.8%, and the small-cap Russell 2000 lost 0.1%.

The S&P 500 communication services (-1.1%), information technology (-1.0%), and consumer discretionary (-0.8%) sectors underperformed the broader market. Conversely, the industrials (+1.4%), materials (+1.1%), and real estate (+0.8%) sectors outperformed.

[…]

Dow component 3M (MMM 196.95, +3.75, +1.9%) for its part lowered its fiscal 2019 guidance, in part due to slowing segments in China. The stock outperformed, though, helped by an earnings beat and by the view that its guidance cut was better than feared.

Fellow Dow components Pfizer (PFE 40.77, +1.24, +3.1%) and Verizon (VZ 53.28, -1.79, -3.3%) also reported better-than-expected profit estimates and issued underwhelming guidance. Pfizer guided fiscal 2019 earnings and revenue below consensus, and Verizon issued mixed guidance for fiscal 2019.

[…]

U.S. Treasuries edged higher, pushing yields lower across the curve. The 2-yr yield decreased one basis point to 2.57%, and the 10-yr yield decreased three basis points to 2.71%. The U.S. Dollar Index gained 0.1% to 95.82. WTI crude rose 2.4% to $53.22/bbl.

[…]

• The Conference Board’s Consumer Confidence Index dropped to 120.2 in January (Briefing.com consensus 126.1) from a downwardly revised 126.6 (from 128.1) in December.
o The key takeaway from the report is that it showed the outlook among consumers was dampened by the volatility in financial markets and the government shutdown, which threatens to register in consumer spending data that would be a drag on first quarter GDP.

  • 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) XLI (Cross-Over) Cross-Over
Finance Down SPY (X-Under) XLF (Cross-Over) Cross-Over
Technology Down SPY SPY Cross-Over
Utility Under Pressure SPY (X-Under) SPY Below
Heath Care Down XLV SPY (Cross-Under) Below
Real Estate Down SPY (X-Under) XLRE (Cross-Over) Cross-Over
Telecom Down SPY SPY Cross-Over
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