Market Remarks

Morning Notes – Friday February 8, 2019

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; moving up since 7:00 AM; emerging descending (or symmetrical)triangle since the NYSE close on Thursday
  • Odds are for a down day – watch for break below 2699.25 for change of fortune
  • No key economic data due:

Markets Around The World

  • Markets in the East closed mostly down – Singapore was up; Shanghai was closed
  • European markets are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • NZD/USD
    • USD/INR
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.647%, up from February 7 close of 2.645%;
    • 30-years is at 2.992%, up from 2.989%
    • 2-years yield is at 2.500%, down from 2.529%
    • The 10-Year-&-2-Year spread is at 0.168, up from 0.165

Key Levels:

  • Critical support levels for S&P 500 are 2691.13, 2687.26 and 2675.79
  • Critical resistance levels for S&P 500 are 2706.17, 2719.32 and 2733.00
  • Key levels for eMini futures: break above 2699.25, the high of 4:00 AM and break below 2687.00, the low of 7:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2704.50 and the index closed at 2706.05 – a spread of about -2.00 points; futures closed at 2704.00 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures price action is to the downside – at 8:30 AM, S&P 500 futures were down by -12.75; Dow by -105; and NASDAQ by -52.25

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: 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 red hammer candle that gapped down at the open; the lower shadow is slightly larger than the real body; potential to make an irregular – 4-candle evening star pattern
    • %K is below %D falling below 80; short-term bearish
    • RSI-9 is falling for three days; EMA8 of RSI9 is rising and broken above a downtrend line; bullish
    • Sequence of lower highs and lower lows since October 3, 2018; need to rise above 2800.18 to break it
  • Above 20-day EMA, 50-day EMA; at/below 100-day SMA; below 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Drifting down since making a high of 2737.75 at 2:00 PM on February 5; moving sideways since 2:00 PM on Thursday
    • 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
    • Arcing down
  • RSI-9 is moving lower since 10:00 AM on February 5 and after making a bearish divergence; breaking above a downtrend line
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Essentially moving sideways since 1:00 PM on Thursday; falling since 4:00 AM and near the low of Thursday near 2685.50
    • broken below a double top or a horizontal trading range; double top high 2727.00 and low of 2722.50
      • 261.8% extension target near 2689.00 is achieved
  • RSI-9 is rising since 11:30 Am on Thursday; made a bullish failure swing at 11:30 PM; falling from near 60 at 3:30 Am to near 30
  • Below 20-bar EMA, which is below  EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 3:30 PM on Thursday
  • The band narrowed from 1:00 AM to 3:15 AM; expanding since; price walked up the upper band till 4:15 then walked down the lower band from 6:20 AM to 7:45; approaching the middle band
  • RSI-21 is rising since 7:45 after making a bullish divergence near 30; above 50
  • Stochastic (9, 1, 3): %K crossed above %D from below 10 and made a bullish spike at 7:45 AM;
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Thursday February 7 in mostly higher volume. Dow Jones Transportation Average traded in higher volume. the indices gapped down at the open and then mostly traded down before recouping some losses near the end. Indices making irregular evening star – 4-cadnle – pattern, which suggests downswing or pause in the market

From Briefing.com:

The S&P 500 lost 0.9% on Thursday, as recurring concerns about a slowdown in global growth and the prospects of a U.S.-China trade deal weighed on investor sentiment. In addition, an underlying sense that the market was due for a pullback also fueled broad-based profit taking.

The Dow Jones Industrial Average lost 0.9%, the Nasdaq Composite lost 1.2%, and the Russell 2000 lost 0.8%.

The S&P 500 energy (-2.1%), information technology (-1.4%), and materials (-1.4%) sectors led Thursday’s retreat. Conversely, the defensive-oriented, and higher-yielding, utilities (+1.3%) and real estate (+0.8%) sectors were the lone groups to finish with gains.

Growth concerns resurfaced following a batch of disappointing updates from overseas: (1) the Bank of England left its key rate unchanged at 0.75% and lowered its 2019 GDP growth outlook to 1.2% from 1.7%, (2) the EU Commission cut its 2019 euro area GDP growth forecast to 1.3% from 1.9%, (3) Germany reported a 0.4% month-over- month decline in industrial production in December and (4) the Reserve Bank of India surprisingly cut its key lending rate 25 basis points to 6.25%.

[…]

In earnings news, Twitter (TWTR 30.80, -3.36, -9.8%), Fiat Chrysler (FCAU 15.23, -2.12, -12.2%), and Tapestry (TPR 33.48, -5.83, -14.8%) all posted steep losses after the companies disappointed investors with their results. On the other hand, Chipotle Mexican Grill (CMG 585.78, +59.72) jumped 11.4% after it impressed investors with a strong report and reassuring outlook.

[…]

U.S. Treasury yields, which move inversely to prices, declined amid the economic growth concerns. The 2-yr yield decreased six basis points to 2.47%, and the 10-yr yield decreased five basis points to 2.65%. The U.S. Dollar Index increased 0.2% to 96.54. WTI crude lost 2.4% to $52.70/bbl.

[…]

• Initial claims for the week ending February 2 decreased by 19,000 to 234,000 (Briefing.com consensus 220,000). Continuing claims for the week ending January 26 decreased by 42,000 to 1.736 million.
o The key takeaway is that the labor market is still looking pretty good, as initial claims remain low, yet outside headlines are stirring concerns that might not remain the prevailing trend.
• Total outstanding consumer credit increased by $16.5 billion in December after increasing an upwardly revised $22.4 billion (from $22.1 billion) in November.
o The key takeaway from the report is that it shows the extension of consumer credit is rooted in nonrevolving debt (e.g. car loans and student loans) while revolving credit (e.g. credit cards), which can be a support for discretionary spending, is not expanding in a robust manner.
Investors will not receive any notable economic data on Friday.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – January) Relative Strength (February) %K vs. %D (January)
Consumer Discretionary Down XLY XLY 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) XTL Above

 

Exit mobile version