Morning Notes – Wednesday January 17, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 2:30 PM on January 16
  • Emerging up-sloping flag; a break below will be bearish
  • Odds are for an up day but most likely down from current levels – watch for break below 2782.25 for change of fortunes
  • Key economic data due:
    • Capacity Utilization (77.9% vs. 77.3% est.) at 9:15 AM
    • Industrial Production (0.9% vs. 0.4% est.) at 9:15 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong and Mumbai were up; Tokyo, Sydney and Seoul were down
  • European markets are mixed – Germany, U.K. and Spain are down; France, Italy, Switzerland and STOXX 600 are up
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
  • Commodities:
    Up Down
    • NatGas
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Sugar
  • Bonds
    • 10-yrs yield is at 2.559% up from January 16 close of 2.544%;
    • 30-years is at 2.833% up from 2.836%
    • 2-years yield is at 2.035% up  from 2.018%
    • The 10-Year-&-2-Year spread is at 0.524 down from 0.526

Key Levels:

  • Critical support levels for S&P 500 are 2768.64, 2761.28 and 2752.78
  • Critical resistance levels for S&P 500 are 2781.99, 2796.80 and 2807.54
  • Key levels for eMini futures: break above 2792.75, the high of 6:00 AM and break below 2787.00, the low of 5:00 AM


  • On Tuesday, at 4:00 PM, S&P future (March contract) closed at 2777.75 and the index closed at 2776.42 – a spread of about +1.25 points; futures closed at 2782.50 for the day; the fair value is -4.75
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +9.50; Dow up by +101.00; and NASDAQ up by +20.00

Directional Bias Before Open

  • Weekly: Up
  • Daily: Up
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Down-to-Side

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

  • Confirmed Uptrend
  • December 2017 closed higher; index has been higher for the nine straight months; it has only one down month, March 2017, since October 2016
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2%
  • The week ending on January 12 was a large green candle with almost no upper and lower shadows; the change was +1.6%
  • Last week’s pivot point 2770.05; R1=2804.04, R2=2821.84; S1=2752.25, S2=2718.26; R1/R2 were breached;
  • An up week;  fourth in last five weeks and seventh in last ten weeks
  • Broke above a down sloping flag on April 24 2017;
    • flag-low was 2322.25 during 27-Mar-17 week; shorter flag-pole length is 317.19 and longer flag-pole length is 590.88;
    • 100% extension target of shorter flag-pole near 2639.41 is achieved; and the 161.8% extension target is near 2835.46
    • 61.8% extension target of longer flag-pole near 2687.41 is achieved; the 100% extension target is near 2913.13
  • Broke above a down-sloping flag on November 14, 2016;
    • the flag low was 2083.79 during 31-Oct-16 week; the shorter flag-pole length is 202.13 and the longer flag-pole length is 383.71;
    • 261.8% extension target of shorter flag-pole near 2612.97 is achieved
    • the 161.8% extension target of longer flag-pole near 2704.63 is achieved; the 261.8% extension target is near 3088.34
  • Last swing low, 2322.25, was the low on March 27, 2017
  • Above 10-week EM; above 39-week SMA and 89-week SMA
  • Confirmed uptrend
  • A relatively large red candle that gapped up at the open but then made a dark cloud cover candle with small, relative to the real body, upper and lower
  • Last pattern, a down-sloping flag in June that was broken to the upside on July 13, 2017; in August the index declined and tested the broken upper limit of the flag; since then the index has made three very small flags; it broke to the upside of the last flag on January 2
  • Above 20-day EMA but above 50-day EMA; Above 100-day SMA and 200-day SMA
  • Pivot Point=2784.20; R1=2799.76, R2=2823.10; S1=2760.86; S2=2745.30; R1/R2/S1 were breached
  • Confirmed Uptrend
2-Hour (e-mini future)
  • Futures are moving higher since 4:00 PM on December 29 in steps; decline from 8:00 AM on January 16 found a support at the EMA50 at 2:00 PM; it rising since then
  • RSI-9 is showing divergence – 6:00 PM on January 14 the price made a high of 2787.50 and RSI was 90.39; at 4:00 AM on January 16, the price made a high of 2803.50 but the RSI was at 85.63; RSI fell below 40 now nearing 65
  • Sequence of higher highs and higher lows since 10:00 AM on November 2 and since August 29 with few exceptions; under pressure
  • At/above rising 20-bar EMA, which is above rising EMA10 of EMA50
30-Minute (e-mini future)
  • Moving up since 2:30 PM on January 16, after a sharp drop during the day, in a narrow up-sloping channel; retraced to 61.8% Fib level of the decline; a break below will be bearish
  • RSI-14 dropped to 22 at 2:30 PM and is rising since then; nearing 65; a break above may signal a change in trend
  • Above 20-bar EMA, which is at EMA10 of EMA50
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is sloping up since NYSE close on Tuesday;
  • The band contracted after NYSE session and during most of Asian session; it started to expand at 2:45 AM and then again started to contract at 8:00 AM
  • MFI-14 has mostly stayed above 50 since 9:00 PM on Tuesday
  • The Stochastic (9, 1, 3): %K declined above 90 at 8:00 and bottomed at 30 at 8:15 AM; it is rising since

Previous Session

Major U.S. indices declined on Tuesday January 16. Market gapped at the open and made day’s high in first half-hour of trading. Then they mostly declined for most of the day. Most indices made dark-cloud cover candle formation. Russell 2000 and Dow Transportation Average made bearish engulfing pattern. Wednesday’s trading will be critical whether Tuesday turns out to be a reversal day or not.

  • S&P 500 Sectors
Up Down
  1. Heath Care
  2. Real Estate
  1. Consumer Discretionary
  2. Consumer Staples
  3. Energy
  4. Materials
  5. Industrials
  6. Finance
  7. Technology
  8. Utility


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