Morning Notes – Friday February 22, 2019

Directional Bias For The Day:

• S&P Futures are higher; drifting down since 6:30 AM after making a high of 2787.75;
• Daily is flashing signs of topping; finding resistance on 30-minute timeframe and 15-minute chart is showing Stochastic Bearish Divergence
• Odds are for a sideways to a down day – watch for break above 2787.75 and below 2780.25 for clarity
• No Key economic data due:

Sentiment & Catalyst

• No discernible change in sentiment from the NYSE close on Thursday;

Markets Around The World

• Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Seoul were up; Tokyo, and Mumbai and Singapore are down
• European markets are higher
• Currencies:
  

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

• Commodities:
  

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

• Bonds
  • 10-yrs yield is at 2.667%, down from February 21 close of 2.688%;
  • 30-years is at 3.018%, down from 3.045%
  • 2-years yield is at 2.520%, down from 2.528%
  • The 10-Year-&-2-Year spread is at 0.147, down from 0.160

Key Levels:

• Critical support levels for S&P 500 are 2764.55, 2760.24 and 2754.60
• Critical resistance levels for S&P 500 are 2781.58, 2789.88 and 2800.18
• Key levels for eMini futures: break above 2787.75, the high of 6:30 AM and break below 2780.25, the low of 4:00 AM

Pre-Open

• On Thursday, at 4:00 PM, S&P future (January contract) closed at 2775.25 and the index closed at 2774.88 – a spread of about +0.50 points; futures closed at 2774.25 for the day; the fair value is +1.00
• Pre-NYSE session open, futures price action is to the upside – at 8:15 AM, S&P 500 futures were up by +11.25; Dow by +123; and NASDAQ by +35.00

Directional Bias Before Open

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

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

Previous Session

Major U.S. indices closed mostly lower on Thursday February 21 in mostly lower volume. Dow Jones Transportation Average traded higher in higher volume. Most major indices are forming a three-day evening star pattern. A closed below Thursday’s low will complete the pattern.

From Briefing.com:

The S&P 500 lost 0.4% on Thursday, as disappointing economic data helped simmer the market’s lengthy rally. The Dow Jones Industrial Average, the Nasdaq Composite, and the Russell 2000 also lost 0.4% apiece.

The S&P 500 energy (-1.6%), health care (-0.9%), and communication services (-0.6%) sectors underperformed the broader market. Conversely, the utilities (+0.8%) and consumer staples (+0.3%) sectors showed relative strength.

The stock market began the day slightly lower as weaker-than-expected economic data tempered buying interest. U.S. business investment declined for the second consecutive month in December, and the eurozone manufacturing sector experienced its first contraction since 2013.

[…]

U.S. Treasuries finished on a lower note, pushing yields higher across the curve. The 2-yr yield and the 10-yr yield increased three basis points each to 2.53% and 2.69%, respectively. The U.S. Dollar Index increased 0.2% to 96.62. WTI crude declined 0.3% to $57.00/bbl.

[…]

• Existing home sales decreased 1.2% month-over-month in January to a seasonally-adjusted annual rate of 4.99 million (Briefing.com consensus 5.05 million) from an upwardly revised 5.00 million (from 4.99 million) in December. Total sales were 8.5% lower than the same period a year ago.
o The key takeaway from the report is that existing home sales activity has not improved much since December even when taking into account the upward revision to the December reading.
• Durable goods orders increased 1.2% in December (Briefing.com consensus 1.3%) after an upwardly revised 1.0% increase (from 0.8%) in November. Excluding transportation, orders increased 0.1% (Briefing.com consensus 0.2%) after decreasing a revised 0.2% (from -0.4%) in November.
o The key takeaway from the report is that business investment remained weak, evidenced by the 0.7% decline in nondefense capital goods orders excluding aircraft. Furthermore, the November reading was revised down to -1.0% from -0.6%.
• The Philadelphia Fed Index for February fell to -4.1 (Briefing.com consensus 12.0) from 17.0 in January.
o The key takeaway from the report is that the headline decrease was driven by declines in most components with the Prices Paid Index returning to its low from 2017.
• The Conference Board’s Leading Economic Indicators Index decreased 0.1% in December (Briefing.com consensus -0.1%) after increasing 0.2% in November.
o The key takeaway from the report is that the Conference Board sees a path to GDP growth slowing to 2.0% by the end of 2019.
• Initial claims for the week ending February 16 decreased by 23,000 to 216,000 (Briefing.com consensus 225,000). Continuing claims for the week ending February 9 decreased by 55,000 to 1.780 million.
o The key takeaway from the report is that the decline returned the initial claims level into a sideways range that has been in place over the past year; however, the four-week moving average for initial claims remains at its highest level since January 2018.

• S&P 500 Sectors