Morning Notes – Friday November 9, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 11:30 PM on Thursday and broke below day’s low of 2795 at 3:30 AM; bouncing off the lows near 2789.00 and back to the congestion zone around 2795.00
  • Odds are for a down day – watch for break above 2799.75 for change of fortune
  • Key economic data due:
    • PPI (0.6% vs. 0.2% est. and 0.2% prev. ) at 8:30 AM
    • Core PPI (0.5% vs. 0.2% est. and 0.2% prev.) at 8:30 AM
    • Prelim UoM Consumer Sentiment (est. 98.0, 98.6% prev.) at 10:00 AM
  • Markets in the East closed lower
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Cotton
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 3.209%, up from November 8 close of 3.234%;
    • 30-years is at 3.406%, down from 3.427%
    • 2-years yield is at 2.930%, up from 2.919%
    • The 10-Year-&-2-Year spread is at 0.252, down from 0.257

Key Levels:

  • Critical support levels for S&P 500 are 2794.99, 2787.82 and 2774.13
  • Critical resistance levels for S&P 500 are 2806.79, 2814.75 and 2816.21
  • Key levels for eMini futures: break above 2799.25, the high of 4:00 AM and break below 2789.50, the low of 6:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (December contract) closed at 2807.50 and the index closed at 2806.83 – a spread of about -1.25 points; futures closed at 2808.75 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures price action is to the downside – at 7:45 AM, S&P 500 futures were down by -14.75; Dow by -107; and NASDAQ by -54.75

Directional Bias Before Open

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Up-Side
  • 30-Min: Side
  • 15-Min: Down
  • 6-Min: Down

The trend and patterns on various time frames for S&P 500 are:

Monthly
  • Under Pressure
  • October 2018 closed sharply lower; broke below previous four months’ lows; only third down month since October 2016
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2% – continues; higher highs and higher lows
Weekly:
  • The week ending on November 2 was a green harami candle within a large red candle with larger lower shadow – almost twice the size of  the real body and the upper shadow – that broke below previous week’s lows
    • Stochastics (9,1, 3) and RSI (14) turning up – %K crossed above %D from below 10 and RSI turned up from 36.35
    • In previous week, Stochastics reached the lowest since the week of October 31, 2016 and RSI the lowest since the week on Jan 11, 2016
  • Last week’s pivot point=2694.38, R1=2785.23 R2=2847.39; S1=2632.22, S2=2541.37; R1 pivot levels was 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
Daily
  • A small doji candle with almost equal sized upper and lower shadows
    • %K is crossing below %D after touching 99 on Wednesday
    • Still lower highs and lower lows since October 3; need to move above October 17 high of 2816.94 to break the sequence; made a high of 2815.15 on Thursday
    • Move above 2814.75 will be bullish and move below 2794.99 will be bearish
  • Above 20-day EMA; below 50-day EMA and-day SMA; above 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Drooping down from a high of 2817.75 at 6:00 PM on Wednesday near resistance zone;
  • Breaking below an uptrend line from October 29 lows; higher highs and higher lows
  • RSI-9 falling from 83.6 2made at 4:00 PM on November 7; below 40
  • Below 20-bar EMA but above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Drifting lower since 8:00 PM on October 7
  • RSI-9 moving lower from the high of 77.32 at 6:00 PM on November 7; just above 30
  • Below 20-bar EMA, which is below 20-bar EMA; both flattening to lower
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting down since 9:00 PM on November 7
  • The band is mostly narrow since Wednesday market close; expanded relatively from 2:45 AM to 7:00 AM with price moving along the lower band
  • RSI-9 rising after making near double or triple bottom at 3:15 AM5:45 AM and 6:30 Am near 28.00; near 40
  • Stochastic (9, 1, 3): %K crisscrossed above %D from below 20
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Thursday November 8. The volume was lower from previous day. Dow Jones Industrial Average closed higher. The major indices made spinning top candlestick lines with upper and lower shadows longer than very small real body. The price range for the day was small.. The market went up from the open till mid-0day when it declined before regaining most of the lost ground in the final hour of trading. Six S&P sectors closed down and five closed up. The overall price-action indicates indecision. More clarity will come when the price breaks above or below Thursday’s extreme levels.

From Briefing.com:

The S&P 500 slipped 0.3% on Thursday on the heels of the Federal Open Market Committee’s (FOMC) decision to leave the fed funds rate unchanged as expected. The benchmark index traded slightly below its flat line leading up to the Committee’s statement release, and sharply dropped to session lows before recouping some losses.

Meanwhile, the Dow Jones Industrial Average was unchanged, the Nasdaq Composite lost 0.5%, and the Russell 2000 lost 0.3%.

In its statement, the FOMC said it expects further gradual rate hikes that are consistent with sustained economic growth, strong labor market conditions, and inflation near its symmetric 2% target over the medium term. The one hitch, if it can be called that, is that the FOMC statement acknowledged business fixed investment has moderated.

[…]

Consequently, the yield on the Fed-sensitive 2-yr Treasury note jumped four basis points to 2.97% — its highest level since June 2008. Also, the benchmark 10-yr yield added two basis points to 3.23%, and the U.S. Dollar Index rose 0.7% to 96.68.

[…]

In the latest batch of Q3 earnings reports, lower guidance overshadowed better-than-expected profits for many names.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – October) Relative Strength (Current) %K vs. %D
Consumer Discretionary Down SPY XLY Cross – Over
Consumer Staples Under Pressure XLP XLP Above
Energy Down SPY SPY Below
Materials Down XLB XLB Cross – Over
Industrials Down SPY XLI Below
Finance Down XLF XLF Cross – Over
Technology Down SPY SPY Below
Utility Under Pressure XLU XLU Above
Heath Care Under Pressure SPY XLV Cross – Over
Real Estate Down (Turning Up) XLRE XLRE Cross – Over
Telecom Down SPY SPY Below

 

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