Morning Notes – Monday February 4, 2019

/ February 4, 2019

Directional Bias For The Day:

  • S&P Futures are moving sideways
  • Odds are for a sideways to up day – watch for break above 2709.25 and below 2698.00 for clarity
  • No key economic data due

Markets Around The World

  • Markets in the East closed mostly up – Singapore closed down; Shanghai and Seoul were closed
  • European markets are mostly lower – U.K. and Switzerland are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Copper
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.715%, up from February 1 close of 2.707%;
    • 30-years is at 3.053%, up from 3.048%
    • 2-years yield is at 2.528%, up from 2.496%
    • The 10-Year-&-2-Year spread is at 0.187, down from 0.211

Key Levels:

  • Critical support levels for S&P 500 are 2696.88, 2693.09 and 2675.79
  • Critical resistance levels for S&P 500 are 2715.00, 2721.37 and 2730.90
  • Key levels for eMini futures: break above 2709.25, the high of 8:00 PM on Sunday and break below 2698.00, the low of 6:00 PM on Sunday

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2704.50 and the index closed at 2706.53 – a spread of about -2.00 points; futures closed at 2704.25 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures price action is lower – at 8:45 AM, S&P 500 futures were down by -2.00; Dow by -13; and NASDAQ by -6.75

Directional Bias Before Open

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

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 February 1 was a large green candle with small lower and upper shadows; a bullish engulfing; breaking above the downtrend line from October 2018 high
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D and approaching 80; RSI is moving up and is just above 50
    • The index is at 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 up +41.77 or +1.6% and ATR is 92.60
  • Last week’s pivot point=2682.42, R1=2740.77, R2=2775.02; S1=2648.17, S2=2589.82; R1/R2/S2 pivot levels were breached;
  • An up week; fourth in last five weeks and sixth 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 Reversing
Daily
  • A small green spinning top, which looks like a doji; continue to stay above the downtrend line from October 2018 high
    • %K is crossing below %D above 90;
    • RSI-14 is above 70;
    • RSI-9 is above 70; showing a failure swing top and needs to rise above 71.46 to nullify it
    • Sequence of lower highs and lower lows since October 3, 2018; need to rise above 2800.18 to break it
  • Above 20-day EMA and 50-day EMA, at/below 100-day SMA; below 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Moving sideways since 10:00 AM on January 31; continue the break above a symmetrical triangle at the high, which resembles a pennant;
    • The symmetrical triangle targets – the 61.8% extension target near 2707.00 is achieved and 100% extension target is near 2732.00
    • The Flag-Pennant targets – the 38.2% extension target is near 2758.00, the 61.8% extension target is near 2815.00 and the 100% extension target is near 2906.00
  • RSI-9 is drifting lower after making a near double top at 80.77, which has a potential to become bearish divergence
  • At/above 20-bar EMA; which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Drifting mostly sideways since 11:30 AM on January 31 near the high;
    • broke above an ascending triangle is emerging since 8:00 AM on January 28; the 161.8% extension target near 2712.00 is achieved
  • RSI-9 is declining from a high of 73 at 4:30 PM on Thursday; potential bearish divergence; just below 40
  • A/above flattening 20-bar EMA, which is above a rising EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting sideways since 10:45 PM on Thursday
  • The band is relatively narrow since 11:45 PM on Sunday;
  • RSI-9 is mostly between 65 and 40 since 12:00 PM on January 31
  • Stochastic (9, 1, 3): %K is below %D and below 30
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Friday February 1 in lower volume. NASDAQ Composite was down. Day’s range was small and most indices made small doji or spinning top candlestick lines.

For the week, the major indices closed higher and in  mostly higher volume from the shorter week before it. Dow Jones Transportation Average traded in lower volume. All S&P sectors closed higher for the week.

From Briefing.com:

The S&P 500 overcame a slow start to the week to finish higher by 1.6% with earnings coming in better than feared and a dovish-minded Federal Reserve easing the market. In the process, the benchmark index also notched its best January since 1987.

The Dow Jones Industrial Average gained 1.3%, the Nasdaq Composite gained 1.4%, and the Russell 2000 gained 1.3%.

The S&P 500 energy (+3.2%), real estate (+2.9%), consumer staples (+2.9%), and industrial (+2.6%) sectors led this week’s advance. On the other hand, the consumer discretionary (-0.1%), financials (+0.1%), and materials (+0.8%) sectors underperformed.

[…]

Regarding earnings, Dow components Apple (AAPL), Boeing (BA), 3M (MMM), Pfizer (PFE), Exxon Mobil (XOM), Chevron (CVX), and Merck (MRK) pleased investors with their results. On the other hand, Caterpillar (CAT), Microsoft (MSFT), Visa (V), DowDuPont (DWDP), McDonald’s (MCD), and Verizon (VZ) underwhelmed.

[…]

U.S. Treasuries saw increased buying interest following Wednesday’s FOMC decision and Fed Chair Powell’s press conference. Treasuries pulled back on Friday, though, after a stronger-than-expected Employment Situation Report for January, which showed that nonfarm payrolls increased by 304,000 (Briefing.com consensus 160,000).

The 2-yr yield finished the week down 11 basis points to 2.50%, and the 10-yr yield fell nine basis points to 2.69%. The U.S. Dollar Index fell 0.2% to 95.66. WTI crude rose 3.0% to $55.28/bbl.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – January) Relative Strength (February) %K vs. %D (January)
Consumer Discretionary Down XLY SPY (Cross-Under) Above
Consumer Staples Down SPY (Cross-Under) SPY Cross-Over
Energy Down XLE (Cross-Over) XLE Above
Materials Down SPY (Cross-Under) SPY Above
Industrials Down XLI (Cross-Over) XLI Above
Finance Down XLF (Cross-Over) XLF Above
Technology Down SPY XLK (Cross-Over) Above
Utility Under Pressure SPY (X-Under) SPY Cross-Over
Heath Care Down SPY (Cross-Under) SPY Cross-Over
Real Estate Down XLRE (Cross-Over) XLRE Above
Telecom Down XLT (Cross-Over) XLT Above

 

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