Morning Notes – Friday February 15, 2019

Directional Bias For The Day:

• S&P Futures are higher; moving up since 2:30 AM; breaking above a descending triangle on 30-minute chart
• Odds are for an up day – watch for break below 2744.50 for change of fortune
• Key economic data due:
  • Empire State Manufacturing Index (est. 7.1; prev. 3.9) at 8:30 AM
  • Import Prices (est. -0.1%; prev. -1.0%) at 8:30 AM
  • Industrial Production (est. 0.1%; prev. 0.3%) at 9:15 AM
  • Capacity Utilization Rate ( est. Core Retail Sales (-1.8% vs. 0.0% est. and 0.2% prev.) at 8:30 AM
  • PPI (-0.1% vs. 0.1% est. and -0.2% prev.) at 8:30 AM
  • Core PPI (0.3% vs. 0.2% est. and -0.1% prev.) at 8:30 AM
  • Unemployment Claims (239K vs. 225K est. and 235K prev.) at 8:30 AM

Sentiment & Catalyst

• Changing sentiment due to sharply missed Retail Sales Data

Markets Around The World

• Markets in the East closed mostly lower – Sydney was up
• European markets are higher
• Currencies:
  

  Up	Down
  Dollar index GBP/USD USD/CHF AUD/USD NZD/USD USD/INR	EUR/USD USD/JPY USD/CAD

• Commodities:
  

  Up	Down
  Crude Oil NatGas Gold Silver Copper Platinum Palladium Sugar Coffee Cocoa	Cotton

• Bonds
  • 10-yrs yield is at 2.668%, down from February 14 close of 2.657%;
  • 30-years is at 3.003%, down from 3.007%
  • 2-years yield is at 2.512%, up from 2.504%
  • The 10-Year-&-2-Year spread is at 0.156, up from 0.153

Key Levels:

• Critical support levels for S&P 500 are 2745.15, 2736.64 and 2731.23
• Critical resistance levels for S&P 500 are 2757.90, 2761.85 and 2785.93
• Key levels for eMini futures: break above 2758.25, the high of 3:00 PM on Thursday and break below 2744.75, the low of 6:30 AM

Pre-Open

• On Thursday, at 4:00 PM, S&P future (January contract) closed at 2745.50 and the index closed at 2745.73 – a spread of about -0.25 points; futures closed at 2743.50 for the day; the fair value is +2.00
• Pre-NYSE session open, futures price action is to the upside – at 7:45 AM, S&P 500 futures were up by +6.75; Dow by +65; and NASDAQ by +18.50

Directional Bias Before Open

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

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

Previous Session

Major U.S. indices closed mixed on Thursday February 14 in mostly higher volume. S&P 500, Dow Jones Industrial Average, NYSE Composite and Wilshire 5000 Total Market Index closed down. NASDAQ Composite, Dow Jones Transportation Average and Russell 2000 closed up. DJT traded in lower volume. Most Indices made indecisive candlestick lines.

From Briefing.com:

The S&P 500 declined as much as 0.8% on Thursday, as disappointing retail sales data for December played into the market’s concerns about a U.S. economic slowdown. The benchmark index, however, staged a late morning rebound back to its flat line, where it wavered for most of the afternoon. It almost finished flat, but a wave of selling activity in the final 20 minutes of trading left the S&P 500 down 0.3% to end the session.

The Dow Jones Industrial Average (-0.4%), the Nasdaq Composite (+0.1%), and the Russell 2000 (+0.1%) experienced similar price action.

Aside from the retail sales data, which showed a 1.2% decline in retail sales for December (Briefing.com consensus +0.2%) — the largest monthly decline since Sept. 2009 — the market navigated its way through a flurry of news headlines.

[…]

The S&P 500 sectors finished the session mixed.

[…]

U.S. Treasuries saw increased buying interest following the release of the retail sales data, which drove yields lower across the curve. The 2-yr yield declined three basis points to 2.50%, and the 10-yr yield declined five basis points to 2.66%. The U.S. Dollar Index decreased 0.1% to 97.05. WTI crude increased 1.2% to $54.47/bbl.

[…]

• Retail sales declined 1.2% (Briefing.com consensus +0.2%) on the heels of a downwardly revised 0.1% increase (from +0.2%) in November. That is the largest monthly decline since September 2009. Excluding autos, retail sales fell 1.8% after a downwardly revised unchanged reading (from +0.2%) for November.
o The key takeaway from this disappointing report is that the weakness wasn’t isolated to gasoline station sales (-5.1%). It was pretty broad-based across discretionary spending categories like furniture and home furnishings (-1.3%), electronics and appliance stores (-0.1%), clothing and accessories (-0.7%), miscellaneous store retailers (-4.1%), nonstore retailers (-3.9%), and restaurants (-0.7%).
• The Producer Price Index for final demand declined 0.1% in January (Briefing.com consensus +0.1%), pulled down by a 0.8% decline in the index for final demand goods. Excluding food and energy, the index for final demand increased 0.3% (Briefing.com consensus +0.2%). On a year-over basis, the index for final demand was up 2.0%, versus 2.5% in December, while the index for final demand, excluding food and energy, was up 2.6%, versus 2.7% in December.
o The key takeaway from the report is that it could portend margin pressures for producers if they don’t choose to pass along the higher costs to their customers.
• Initial claims for the week ending February 9 increased by 4,000 to 239,000 (Briefing.com consensus 225,000). Continuing claims for the week ending February 2 increased by 37,000 to 1.773 million.
o The key takeaway from the report is that the four-week moving average of 231,750 for initial claims is the highest since January 27, 2018.
• Total business inventories declined 0.1% in November (Briefing.com consensus +0.2%) after increasing an unrevised 0.6% in October. Total business sales fell 0.3% after increasing a downwardly revised 0.1% (from 0.3%) in October.
o The key takeaway from the report is that business sales rose at a slower pace than inventories. That distinction, if it persists, will diminish pricing power.

[…]

• S&P 500 Sectors