Morning Notes – Wednesday October 31, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 1:30 PM on October 30
  • Odds are for an up and choppy day with elevated volatility – watch for break below 2696.25 for change of fortune
  • Key economic data due:
    • ADP Non-Farm Employment Change (27K vs. 188K est.) at 8:15 AM
    • Employment Cost Index (0.8% vs. 0.7% est.) at 8:30 AM
    • Chicago PMI (est. 60.1) at 9:45 AM

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • GBP/USD
    • USD/CAD
    • USD/INR
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Gold
    • Silver
    • Sugar
    • Cotton (Unch.)
  • Bonds
    • 10-yrs yield is at 3.156%, up from October 29 close of 3.110%;
    • 30-years is at 3.396%, up from 3.356%
    • 2-years yield is at 2.839%, up from 2.823%
    • The 10-Year-&-2-Year spread is at 0.273, up from 0.251

Key Levels:

  • Critical support levels for S&P 500 are 2672.45, 2640.54 and 2603.54
  • Critical resistance levels for S&P 500 are 2706.85, 2722.70 and 2753.59
  • Key levels for eMini futures: break above 2716.00, the low of 3:00 PM on October 25 and break below 2696.25, the low of 5:30 AM


  • On Tuesday, at 4:00 PM, S&P future (December contract) closed at 2683.25 and the index closed at 2682.63 – a spread of about -0.50 points; futures closed at 2685.25 for the day; the fair value is -2.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up +21.50; Dow by +182; and NASDAQ by +82.75

Directional Bias Before Open

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

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 green candle, almost like a bullish engulfing with very small upper and lower shadows
    • %K made a bullish divergence on October 23, 2018 and another on October 29
    • 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 from high but breaking above some shallower down trendlines; approaching a high and a move above 2707.00 will break the sequence of lower highs and lower lows; broken above EMA 50
  • RSI-9 above 70 after making three bullish divergences since October 24 – at 2:00 PM on October 24, at 8:00 AM on October 26, and at 2:00 Pm on October 29;
  • Above 20-bar EMA, which is at EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Breaking above a down trendline from the high of 10:00 AM on October 19; approaching the down trendline from the high of 3:00 AM on October 17; making first higher high since October 17
  • RSI-9 rising from a low of 25.71 at 3:00 PM on October 29; above 65
  • Above 20-bar EMA, which is above 20-bar EMA; both falling
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving mostly up since 9:15 PM on October 29
  • The band narrowed from 9:30 PM to 00:45 AM; expanded a bit but still relatively narrow
  • RSI-9 above 50 since 2:30 PM on October 30; mostly moving along 65 since 0:45 AM
  • The Stochastic (9, 1, 3): %K crisscrossing %D higher from above 70 since 6:45 AM
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Tuesday October 30. The volume was mostly lower from Monday. Dow Jones Industrial Average traded in higher volume.

The indices opened to the upside and the after a brief retreat continued higher and closed at the high for the day. All S&P Sectors were up.


The S&P 500 gained 1.6% in Tuesday’s session, in which it traded mostly in positive territory with all 11 S&P sectors closing higher.


Tuesday’s price action in the S&P 500 oscillated with the volatility in large-cap technology stocks before finally taking a decisive swing upwards in the last hour of trading. The tech-heavy Nasdaq Composite, which had lost as much as 0.7% intraday, closed at its session high with a 1.6% gain.

Meanwhile, the Dow Jones Industrial Average added 1.8%, and the Russell 2000 added 2.0%.


Overseas, Hong Kong’s Hang Seng lost 0.9% on Tuesday, hitting a fresh low for the year, while China’s Shanghai Composite gained 1.0% as the Chinese yuan reached its lowest level since mid 2008. Meanwhile, the Euro Stoxx 50 decreased 0.3% with Germany’s DAX closing 0.4% lower.

  • 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 SPY
Real Estate Down (Turning Up) SPY XLRE
Telecom Down XTL SPY


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