Morning Notes – Monday October 15, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving higher since 4:45 AM from a low of 2745.25; almost near Friday’s close
  • Odds are for a sideways to an up day with increased volatility
  • Key economic data due:
    • Core Retail Sales ( -0.1% vs. 0.4% est.) at 8:30 AM
    • Retail Sales (0.1% vs. 0.7% est.) at 8:30 AM
    • Empire State Manufacturing Index (21.1 vs. 20.4 est.) at 8:30 AM
    • Treasury Currency Report anytime today

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai was up
  • European markets are mostly up – France and Switzerland are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • Dollar index
    • USD/JPY
    • USD/CHF
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 3.163%, up from October 12 close of 3.141%;
    • 30-years is at 3.343%, up from 3.316%
    • 2-years yield is at 2.857%, unchanged
    • The 10-Year-&-2-Year spread is at 0.306, up from 0.288

Key Levels:

  • Critical support levels for S&P 500 are 2745.15, 2732.66 and 2710.51
  • Critical resistance levels for S&P 500 are 2775.77, 2784.11 and 2795.14
  • Key levels for eMini futures: break above 2769.25, the high of 8:00 PM on October 14 and break below 2753.75, the low of 6:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (December contract) closed at 2768.75 and the index closed at 2767.13 – a spread of about +1.75 points; futures closed at 2768.50 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures price action is to the downside – at 8:15 AM, S&P 500 futures were down -1.50; Dow by -21.00; and NASDAQ by -9.00

Directional Bias Before Open

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

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 12 was a large red candle, following a bearish engulfing candle, which breached many weeks’ low; the lower shadow was twice the size of upper shadow and two-third the size of the real body
    • Stochastics (9,1, 3) and RSI (14) continue to decline following their bearish divergences
  • Last week’s pivot point=2790.82, R1=2871.14 R2=2975.14; S1=2686.82, S2=2606.50; S1/S2/S3 pivot levels were breached;
  • Third down week in a row; third in last five weeks and fifth 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
  • Small red real body with large lower shadow and small upper shadow – looks like a dragonfly doji – within the real body of previous day or a harami candlestick formation
  • %K crossed above %D from oversold levels at at 0.52, the lowest since February 8
  • Below 20-day EMA, 50-day EMA and 100-day SMA; at/below 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Forming a symmetrical triangle at the low end of sharp decline of past few days; a break below its will make it a pennant formation and a break above it will start a bounce
  • RSI-9 continue to rise 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)
  • Mostly moving sideways since 6:30 PM on October 11 between 2784.50 and 2732.25
  • RSI-9 mostly between 40 and 65 since 2:30 AM on October 11 with few forays below
  • At/above 50-bar EMA, which is above 20-bar EMA – both almost flat
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 0:15 AM on October 11 with alternatively showing slight up or down biases for few hours
  • The band narrowed from 10:45 PM on Sunday to 4:30 AM; expanding since
  • RSI-9 rising from 31.61 at :45 AM; above 65
  • The Stochastic (9, 1, 3): %K is crossed above %D from below 10 at 4:45 AM; crisscrossing %D above 90 since 5:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Friday October 12 in lower volume. the traded volume was lower than that on Thursday but still higher than previous week’s average.

From Briefing.com:

Stocks sold off sharply this week, sending the S&P 500 lower by 4.1%. Fears over potentially weakening economic and earnings growth helped fuel the selling, which left stocks at three-month lows going into the third quarter earnings season. The Dow Jones Industrial Average lost 4.2% this week, and the tech-heavy Nasdaq Composite fell 3.7%.

The International Monetary Fund (IMF) cut its 2018 and 2019 global growth outlook to 3.7% from 3.9% on Tuesday, citing trade uncertainties that include tariffs between the U.S. and China, a pending Brexit deal, and the new trilateral agreement between the U.S., Canada, and Mexico that’s supposed to replace NAFTA.

[…] The yield on the benchmark 10-yr Treasury note, which spiked to a seven-year high last week, hovered between 3.12% and 3.26% before eventually settling Friday at 3.14% — nine basis points below last Friday’s close. Meanwhile, the yield on the more Fed-sensitive 2-yr Treasury note fell four basis points to 2.84%, leaving the 2-10 spread with a five bps point loss for the week.

[…] The CME FedWatch Tool places the chances of a December rate hike at 79.7%; that’s down slightly from 80.0% last Friday.

The S&P 500 got into technical trouble this week, breaching its 50-day moving average on Wednesday and then its 200-day moving average on Thursday. The benchmark index tried to reclaim its 200-day moving average on Friday, but closed right at the key technical mark. The Dow Jones Industrial Average and the Nasdaq Composite breached their 200-day moving averages as well; the Dow eventually reclaimed the key technical level, but the Nasdaq did not.

  • 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 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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