Morning Notes – Tuesday February 5, 2019

/ February 5, 2019

Directional Bias For The Day:

  • S&P Futures are moving sideways to up since the NYSE close on Monday
  • Odds are for an up day – watch for break below 2716.25 for change of fortune
  • Key economic data due:
    • ISM Non-Manufacturing PMI (est. 57.2; prev. 57.6) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly up – Tokyo was down; Shanghai, Hong Kong, Seoul and Singapore were closed
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Crude Oil
    • Gold
    • Silver
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.737%, up from February 4 close of 2.724%;
    • 30-years is at 3.070%, up from 3.060%
    • 2-years yield is at 2.549%, up from 2.545%
    • The 10-Year-&-2-Year spread is at 0.188, up from 0.179

Key Levels:

  • Critical support levels for S&P 500 are 2717.15, 2712.62 and 2698.75
  • Critical resistance levels for S&P 500 are 2730.90, 2760.88 and 2775.59
  • Key levels for eMini futures: break above 2728.25, the high of 6:30 AM and break below 2716.25, the low of 7:30 PM on Monday

Pre-Open

  • On Monday, at 4:00 PM, S&P future (January contract) closed at 2723.75 and the index closed at 2724.87 – a spread of about -1.00 points; futures closed at 2721.25 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +5.25; Dow by +96; and NASDAQ by +24.50

Directional Bias Before Open

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

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

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 green candle that is breaking above 100-day SMA with almost no upper shadow and small lower shadow;
    • %K is crossing below %D above 90;
    • RSI-14 is above 65;
    • RSI-9 is above 70; emerging failure swing top was nullified
    • 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/above 100-day SMA; below 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Moving up since 10:00 AM on February 4; continue the break above a symmetrical triangle at the high, which resembles a pennant;
    • The symmetrical triangle targets – closing on the 100% extension target near 2735.00; 161.8% extension target is near 2776.00
    • 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 moving higher and is above 70
  • Above 20-bar EMA; which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 3:00 AM;
    • broke above a horizontal trading range between 2713.00 and 2596.50
    • the 61.8% extension target near 2724.00 is achieved; the 100% extension target is near 2731.00 and 161.8% extension target is near 2742.00
  • RSI-9 is rising from just below 50 since midnight; above 80
  • Above rising 20-bar EMA, which is above a rising EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting sideways to up since 4:15 PM on Monday
  • The band narrowed from midnight to 3:30 AM; expanding since with price moving along the upper band
  • RSI-9 is mostly above 50 since 10:45 AM on Monday; rising since 00:45 AM from near 50; above 70
  • Stochastic (9, 1, 3): %K moving up and crisscrossing %D since 00:45 AM; declining since 6:00 from above 90
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday February 4 in mixed volume. Dow Jones Industrial Average, S&P 500 and NASDAQ Composite traded in lower volume. Dow Jones Transportation Average and Russell 2000  traded in higher volume. DJIA is breaking above its downtrend line from October high. Now only DJT is below its downtrend line.

From Briefing.com:

The S&P 500 gained 0.7% on Monday with shares of mega-cap companies leading the advance. The Dow Jones Industrial Average gained 0.7%, the Nasdaq Composite gained 1.2%, and the Russell 2000 gained 1.0%.

A mega-cap rally characterized the day’s trading action for most of the session with buying interest concentrated among a handful of names ahead of Alphabet’s (GOOG 1132.80, +22.05, +2.0%) earnings report after the close. A last minute swarm of broad-based buyers, though, pushed most sectors to finish near their best levels of the day.

The S&P 500 information technology (+1.6%), industrials (+1.3%), and communication services (+1.0%) sectors outperformed the broader market.

Shares of widely-held companies like Apple (AAPL 171.25, +4.73, +2.8%), Microsoft (MSFT 105.74, +2.96, +2.9%), Facebook (FB 169.25, +3.54, +2.1%), and Netflix (NFLX 351.34, +11.49, +3.4%) all rose more than 2.0%.

[…]

The health care (-0.3%) and materials (-0.2%) sectors underperformed the broader market and were the only sectors ending Monday with a loss.

U.S. Treasuries also finished the day with losses, pushing yields higher across the curve. The 2-yr yield and 10-yr yield increased three basis points each to 2.53% and 2.72%, respectively. The U.S. Dollar Index gained 0.3% to 95.84. WTI crude lost 1.2% to $54.61/bbl.

[…]

• Factory orders declined 0.6% in November (Briefing.com consensus +0.3%) on the heels of a 2.1% decline in October. Excluding transportation, orders were down 1.3% in November following a 0.2% increase in October.
o The key takeaway from the report is that it showed a drop in business investment in November, evidenced by the 0.6% decline in new orders for nondefense capital goods excluding aircraft. That raises the potential for a further decline in December since the November softness preceded the big market sell-off in December and the start of the partial government shutdown in January that were drags on business confidence.

  • 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) SPY (Cross-Under) Above

 

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