Morning Notes – Tuesday October 9, 2018

Directional Bias For The Day:

  • S&P Futures are lower; declined from 4:00 PM high of 2894.00 to 7:30 AM low of 2874.50; rising since to 2885.00
  • At/Below a down trendline
  • Break above 2894.00 is critical
  • Odds are for a volatile with real chance of turning around; if the bounce fails then there is an increased chance of decline to near 2850.00 level
  • Watch for break above 2887.00 and below 2874.50 for more clarity
  • No key economic data due:

Markets Around The World

  • Markets in the East closed mostly down – Shanghai was up; Seoul was closed
  • European markets are mostly down – Italy is up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum (Unch.)
    • Coffee
    • Cocoa
    • Copper
    • Palladium
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.237%, up from October 8 close of 3.233%;
    • 30-years is at 3.410%, up from 3.405%
    • 2-years yield is at 2.885%, down from 2.889%
    • The 10-Year-&-2-Year spread is at 0.352, up from 0.344

Key Levels:

  • Critical support levels for S&P 500 are 2862.08, 2854.03 and 2833.73
  • Critical resistance levels for S&P 500 are 2889.45, 2893.70 and 2903.04
  • Key levels for eMini futures: break above 2887.00, the high of 5:00 AM and break below 2874.50, the low of 7:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (December contract) closed at 2889.75 and the index closed at 2884.43 – a spread of about +5.25 points; futures closed at 2893.75 for the day; the fair value is -4.00
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down -12.00; Dow by -104.00; and NASDAQ by -27.00

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 120-Min: Down
  • 30-Min: Down
  • 15-Min: Down
  • 6-Min: Down-Side

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

Monthly
  • 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%
Weekly:
  • The week ending on October 5 was a large bearish engulfing candle which closed below past two weeks’ low
    • Stochastics (9,1, 3) and RSI (14) made bearish divergences
  • Last week’s pivot point=2898.24, R1=2927.19 R2=2968.81; S1=2856.62, S2=2827.67; S1/R1 pivot levels were breached;
  • Second down week in a row; third in last five weeks and fourth in last ten weeks
  • Broke above an ascending triangle but retraced back to its upper limit; 100% extension target is near 3070.00 level
  • 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 2639.44 and the 161.8% extension target near 2835.46 are achieved; the 261.8% extension target is near 3013.72
    • 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; Last swing high, 2872.87, was during the week of January 22, 2-018; the low since the last swing high is 2532.69 during the week if February 5, 2018
  • At 10-week EMA; above 39-week SMA and above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A relatively small green candle with large lower shadow and small upper shadow; bouncing off the support zone near 2850.-2870 level;
  • %K crossed below %D
  • Below 20-day EMA; at/above 50-day EMA; above 100-day SMA and 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Below a down trendline October 3 high; trying to break above it
  • RSI-9 rising from a low of 19.95 on October 4 and after making a bullish divergence at 10:00 AM on October 8; just below 40 after crossing above it
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Below a down trendline from October 3 high; trying to break above it since 4:00 PM on October 8; price moving down along the trend line
  • RSI-9 declining since 4:00 PM on October 8from a high of 59.33; dropped below 40 at 5:30 AM; just at 40
  • Below 20-bar EMA, which is below 50-bar EMA
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving down 8:45 PM
  • The band was narrow from 8:45 PM to 4:30 AM; expanding since with price moving along the lower band till 8;00 AM and is now approaching the middle
  • RSI-9 rising from a low of 26.34 at 7:45 AM to near 50
  • The Stochastic (9, 1, 3): %K is crossed above %D from 0 at 7:45 AM
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Monday October 8 in mostly lower volume. Dow Jones Industrial Average and NYSE Composite advanced and DJIA traded in higher volume. The market declined for most of the day and then turned around in the last half-hour of trading.

From Briefing.com for last week:

The stock market fell on Friday as bond yields continued to climb following the release of the Employment Situation report for September. The S&P 500 and the Dow lost 0.6% and 0.7%, respectively. The tech-heavy Nasdaq dropped 1.2%.[ …]

The key takeaway from the report [Non-Farm Payroll] is that the labor market is solid and still simmering with the prospect of pent-up wage pressures being unleashed at any point as employers encounter difficulty in finding qualified workers. […]

The key takeaway from the report [August Trade Balance] is that it has yet to confirm the tariff actions are succeeding in cutting the trade deficit in a big way; moreover, with the third quarter real average trade deficit 8.9% higher than the second quarter average, trade will be accounted for as a negative input in Q3 GDP forecasts. […]

The key takeaway from the report [Consumer Credit Report] is that it reflects a pickup in credit demand that should be construed as an offshoot of a strengthening economy led by a solid labor market.

For the week:

  • S&P 500 Sectors
Sector Daily Trend Relative Strength (Last Month) Relative Strength (Current Month)
Consumer Discretionary Down (Break below trading zone – 114.80) XLY SPY
Consumer Staples Side (Break Down Support = 53.49) SPY XLP
Energy Up (From Side) SPY XLE
Materials Side SPY SPY
Industrials Up-Side XLI XLI
Finance Side SPY XLF
Technology Up (Under Pressure) XLK SPY
Utility Up-Side SPY XLU
Heath Care Up (under Pressure) XLV XLV
Real Estate Down SPY SPY
Telecom Side XTL SPY

 

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