Morning Notes – Friday October 12, 2018

Directional Bias For The Day:

  • S&P Futures are higher; closed 14 point above the NYSE session close; moving higher since 5:00 AM after retracing from a high of 2785.00 reached at 2:30 AM
  • Odds are for an up day with increased volatility
  • Key economic data due:
    • Import Prices ( 0.5% vs. 0.3% est.) at 8:30 AM
    • Prelim UoM Consumer Sentiment (est. 100.4 ) at 10:00 AM
    • Prelim UoM Inflation Expectations (est. 2.7%0 at 10:00 AM

Markets Around The World

  • Markets in the East closed higher
  • European markets are mostly up – Spain is down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • EUR/USD
    • GBP/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Silver
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • NatGas
    • Platinum
  • Bonds
    • 10-yrs yield closed at 3.133%, down from October 10 close of 3.225%;
    • 30-years is at 3.307%, down from 3.398%
    • 2-years yield is at 2.861%, up from 2.849%
    • The 10-Year-&-2-Year spread is at 0.272, down from 0.376

Key Levels:

  • Critical support levels for S&P 500 are 2710.51, 2702.71 and 2698.95
  • Critical resistance levels for S&P 500 are 2757.58, 2784.11 and 2795.14
  • Key levels for eMini futures: break above 2777.50, the high of 7:00 AM and break below 2764.00, the low of 5:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (December contract) closed at 2731.50 and the index closed at 2728.37 – a spread of about +3.00 points; futures closed at 2745.50 for the day; the fair value is -14.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:15 AM, S&P 500 futures were up +30.25; Dow by +249.00; and NASDAQ by +111.25

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: Up-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
  • Another large red candle but almost equal sized upper and lower shadows that were close to one-0third of the real body
  • %K is below %D but is turning up from being deeply oversold at 0.52, the lowest level since February 8
  • Below 20-day EMA, 50-day EMA and 100-day SMA; and 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Bouncing off the low of July 3, 2018 at 2:00 PM; many large candles of opposite color since 6:00 PM on October 10 indicating indecision and elevated volatility
  • RSI-9 rising form a low of 8.07 at 10:00 PM on October 10; bullish divergence at 2:00 PM on October 11
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Gradually rising – bouncing off – from a low of 2712.25 at 2:30 PM on October 11;
  • RSI-9 rising since making a low of 6.9 at 4:30 PM on October 10; made a bullish divergence at 2:30 PM on October 11
  • At 20-bar EMA, which is at 50-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 3:00 AM after rising from 8:00 PM
  • The band was briefly narrow, relatively, from  11:00 PM to 00:30 AM; expanded since
  • RSI-9 mostly between 40 and 65, with couple of trips above; bouncing off near 40 to just above 50
  • The Stochastic (9, 1, 3): %K is crossed above %D from near 0 at 5:00 AM; crossing below at 7:00 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices again closed sharply lower on Thursday October 11 in increased volume. The market suffered the biggest two-day loss since early February 2018. Volatility was elevated. It reached a intraday high of 28.84 from 11.34 on October 3 and 14.82 at the close of session on last Friday.

From Briefing.com:

Wall Street extended Wednesday’s tumble on Thursday in a volatile day of trading. The major averages settled notably lower, with the S&P 500 losing 2.1%, the Dow Jones Industrial Average falling 2.1%, and the Nasdaq Composite shedding 1.3%. With Thursday marking its sixth straight decline, the S&P 500 is now down 5.5% for the week and is 6.9% below its September 20 record close.[…]

A drop in bond yields did provide some relief for stock traders, […] That yield curve flattening weighed on lenders[…]

The S&P 500’s financial sector lost 2.9%. The oil-sensitive energy sector was another notable underperformer, losing 3.1%[…]

All 11 S&P 500 sectors declined on Thursday.

[…]From a technical standpoint, the S&P 500 got into trouble once again on Thursday, closing below its 200-day moving average (2766) for the first time since March, after breaching its 50-day moving average the day before. The Dow Jones Industrial Average also fell below its 200-day moving average (25140) and the Nasdaq Composite and Russell 2000 stayed below theirs.

[…]Also of note, the CBOE Volatility Index (VIX) spiked once again on Thursday, jumping 11.8% to 25.57, marking its highest level since February.

[…]The key takeaway from the report [CPI} is that it helped temper concerns about rising inflation for the time being, yet with total CPI and core CPI running above the Fed’s longer-run inflation target of 2.0%, it still left little reason to think the Fed is going to back away from a rate hike in December.

[…]The key takeaway from that report [Unemployment Claims] is that it remains reflective of a tight labor market, which will catch the Fed’s eye as a contributing factor for why it can validate the continuation of gradual rate hikes.

  • S&P 500 Sectors
Sector Daily Trend Relative Strength (Last Month) Relative Strength (Current)
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 SPY
Finance Side SPY XLF
Technology Up (Under Pressure) XLK SPY
Utility Up-Side SPY XLU
Heath Care Up (under Pressure) XLV SPY
Real Estate Down SPY SPY
Telecom Side XTL SPY

 

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