Morning Notes – Tuesday October 30, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 8:00 AM after rising from 3:30 PM on October 29
  • Odds are for a down and choppy day with elevated volatility
  • Key economic data due:
    • S&P/Case-Shiller Composite-20 HPI (5.5% vs. 6.0% est.) at 9:00 AM
    • CB Consumer Confidence (est. 136.3) at 10:00 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Sydney and Seoul closed up; Hong Kong,  Mumbai and Singapore closed down
  • European markets are mostly down – Italy and Switzerland are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/CHF
  • Commodities:
    Up Down
    • NatGas
    • Silver
    • Platinum
    • Coffee
    • Crude Oil
    • Gold
    • Copper
    • Palladium
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.113%, up from October 29 close of 3.087%;
    • 30-years is at 3.359%, up from 3.329%
    • 2-years yield is at 2.839%, up from 2.823%
    • The 10-Year-&-2-Year spread is at 0.274, up from 0.264

Key Levels:

  • Critical support levels for S&P 500 are 2603.54, 2594.62 and 2586.27
  • Critical resistance levels for S&P 500 are 2642.20, 2662.54 and 2682.69
  • Key levels for eMini futures: break above 2660.75, the high of 8:00 AM and break below 2636.25, the low of 6:30 PM on October 29


  • On Monday, at 4:00 PM, S&P future (December contract) closed at 2643.00 and the index closed at 2641.25 – a spread of about -1.75 points; futures closed at 2643.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures price action is to the downside – at 9:15 AM, S&P 500 futures were down -4.75; Dow by -63; and NASDAQ by -55.25

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correct
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: Down-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 October 26 was a large red candle, following a doji with small lower shadow and longer upper shadow; broke below lows since the week of May 7, 2018
    • Stochastics (9,1, 3) and RSI (14) continue to decline following their bearish divergences at the last high
    • Stochastics at the lowest since the week of October 31, 2016 and RSI at the lowest since the week on Jan 11, 2016
  • Last week’s pivot point=2688.60, R1=2749.03 R2=2839.38; S1=2598.25, S2=2537.82; S1/S2/S3 pivot levels were breached;
  • First down week in a row; fourth 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; retraced back to the lower trend line of triangle
  • 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 near 2913.13 is achieved; the 161.8% extension target is near 3138.85
  • 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, 2532.69, was the low on February 5, 2018; Last swing high, 2940.91, was during the week of September 17, 2018;
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • Uptrend Under Pressure
  • A large red bearish engulfing candle with lower shadow almost equal to the real body and slightly smaller upper shadow
    • %K made a bullish divergence on October 23, 2018; another potential higher %K at a lower level
    • Below a down trend line since the high on October 3
    • Lower highs and lower lows since then
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Below a down trend line; lower highs and lower lows; below EMA 50
  • RSI-9 making bullish divergences since October 24, ; thrice bullish divergences – at 2:00 PM on October 24, at 8:00 AM on October 26, and at 2:00 Pm on October 29; potential for a bounce
  • Below/at EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down
30-Minute (e-mini future)
  • Below a downtrend line and at a previous congestion zone
  • RSI-9 rising from a low of 25.71 at 3:00 PM on October 29; above 40
  • At/Below 20-bar EMA, which is below 20-bar EMA; both falling
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways 10:00 PM
  • The band mostly narrowed from 1:30 AM
  • RSI-9 mostly between 40 and 65 since 4:00 PM on October 29 with few forays below it
  • The Stochastic (9, 1, 3): %K crossed below %D from above 90
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Monday October 29. The volume was mostly lower from Friday. Dow Jones Transportation Average traded in higher volume.

The indices gapped higher at the open but then turned down after one hour of trading and closed the gap. They declined for the rest of the and most indices made bearish engulfing patterns. All S&P Sectors were down.


The S&P 500 lost 0.7% in another volatile session on Monday, extending its monthly losses to 9.4%. Continued tech weakness shook investor confidence, and reports of another possible round of Chinese tariffs helped accelerate losses in the afternoon.

Stocks opened strong, with the S&P 500 trading as high as 1.8% early on, before gradually losing steam in the afternoon. Particular weakness in leadership stocks within the information technology (-1.8%), communication services (-1.6%), and consumer discretionary (-1.5%) sectors weighed heavily on the broader market.

Meanwhile, the Dow Jones Industrial Average lost 1.0%, the Nasdaq Composite lost 1.6%, and the Russell 2000 lost 0.4%.

The major averages were already at session lows, with the S&P 500 hovering near its unchanged mark, before the U.S.-China news broke out. Bloomberg reported that the White House is preparing to announce tariffs on all remaining Chinese imports if talks next month between U.S. president Donald Trump and Chinese president Xi Jinping fail to ease the trade war.

[…] In other markets, Treasury yields closed slightly higher with the 2-yr yield and 10-yr yield adding one basis point each to 2.82% and 3.09%, respectively. Also, the U.S. Dollar Index increased 0.3% to 96.63, and WTI crude fell 1.1% to $66.85/bbl.

[…]  The key takeaway from the [PCE Price Index] report is the recognition that PCE price inflation decelerated to 2.0% year-over-year from 2.2% in August. Core PCE price inflation held steady at 2.0%. The inflation readings are on par with the Federal Reserve’s longer run target, yet they haven’t moved to such a degree that they are going to alter the Federal Reserve’s current policy stance, which involves an expectation for further gradual rate hikes.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month) Relative Strength (Current)
Consumer Discretionary Down XLY SPY
Consumer Staples Under Pressure SPY XLP
Energy Down SPY SPY
Materials Down SPY SPY
Industrials Down XLI SPY
Finance Down SPY XLF
Technology Down XLK SPY
Utility Under Pressure SPY XLU
Heath Care Under Pressure XLV XLV
Real Estate Down (Turning Up) SPY XLRE
Telecom Down XTL SPY


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