Morning Notes – Thursday October 11, 2018

Directional Bias For The Day:

  • S&P Futures are sharply lower; moving higher since 5:00 AM after making a low of 2747.25 below earlier low of 2748.50; nearly 30 points above the day’s low so far
  • Odds are for a down day with a good chance of a dead-cat-bounce; increased volatility
  • Key economic data due:
    • CPI ( 0.1% vs. 0.2% est.) at 8:30 AM
    • Core CPI ( 0.1% vs. 0.2% est.) at 8:30 AM
    • Unemployment Claims (214K vs. 207K est.) at 8:30 AM

Markets Around The World

  • Markets in the East closed lower
  • European markets are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/INR
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
    • Coffee
  • Bonds
    • 10-yrs yield is at 3.191%, down from October 10 close of 3.225%;
    • 30-years is at 3.372%, down from 3.398%
    • 2-years yield is at 2.853%, up from 2.849%
    • The 10-Year-&-2-Year spread is at 0.327, down from 0.376

Key Levels:

  • Critical support levels for S&P 500 are 2770.77, 2755.16 and 2733.52
  • Critical resistance levels for S&P 500 are 2794.73, 2816.44 and 2823.84
  • Key levels for eMini futures: break above 2785.50, the high of 7:00 PM on October 10 and break below 2756.25, the low of 7:30 AM on Tuesday

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (December contract) closed at 2792.50 and the index closed at 2785.68 – a spread of about +6.75 points; futures closed at 2781.00 for the day; the fair value is +11.50
  • Pre-NYSE session open, futures price action is to the downside – at 8:15 AM, S&P 500 futures were down -10.50; Dow by -130.00; and NASDAQ by -26.25

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: Uptrend Under Pressure
  • 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 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 large red candle with no upper and lower shadows that erased all gains since July 12, 2018
  • %K is below %D and deeply oversold at 0.52, the lowest level since February 8
  • Below 20-day EMA, 50-day EMA and 100-day SMA; just above 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Broke below many support levels; moving sideways since 8:00 PM
  • RSI-9 declining in steps since the September 21 high of 84.,63; below 10
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving sideways since 6:00 PM on October 10 between 2779.25 and 2748.5
  • RSI-9 rising since making a low of 6.9 at 4:30 PM on October 10; crossed above 40 at 2:20 M
  • At 20-bar EMA, which is below 50-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 9:45 PM on Wednesday
  • The band was briefly narrow, relatively, at 2:00 AM; expanded at 3:45 AM
  • RSI-9 made a low of 2.17 at 4:45 PM; crossed above 20 at 10:00 PM and crossed above 40 at 2:00 AM; above 50
  • The Stochastic (9, 1, 3): %K is crossed above %D from near 0 at 5:15 AM; crisscrossing %D upwards; above 90
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Wednesday October 9 in increased volume. The market suffered the biggest loss since early February 2018.

From Briefing.com:

Stocks tumbled on Wednesday as bond yields held steady at multi-year highs and amid continued concerns about economic and earnings growth prospects. The S&P 500 lost 3.3%, extending its losing streak to five sessions in a row, which is its longest losing streak since 2016. The Dow Jones Industrial Average and the Nasdaq Composite also fell sharply, losing 3.2% and 4.1%, respectively. […]

However, the selling didn’t feel fast and panicky; rather, it was somewhat orderly in nature, which underscores the idea that it was largely a risk-reduction effort, whereby market participants are cutting their exposure to stocks, cognizant that earnings growth estimates are at risk with rising interest rates, tariff actions, and higher costs.

Other key technical breaches included the Dow falling below its 50-day moving average, the Nasdaq falling below its 200-day moving average, and the Russell 2000 falling below its 200-day moving average.[…]

Information technology was the worst-performing S&P sector on Wednesday, tumbling 4.8%, but growth-sensitive, cyclical groups underperformed on the whole, with financials, consumer discretionary, industrials, energy, and communications services all losing between 3.0% and 3.9% apiece.[…]

Interestingly, the equity sell off did not lead to higher demand for “risk-free” U.S. Treasuries. In fact, bonds declined with stocks on Wednesday, with investors presumably opting to go to cash instead.

  • 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 XLRE
Telecom Side XTL SPY

 

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