Morning Notes – Wednesday November 21, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 6:00 PM on Tuesday and after making a bullish divergence
  • Bias on daily timeframe is to the down side; intraday bias for NYSE open is to the upside; odds are for a choppy day with elevated volatility – watch for break above 2666.75 and break below 2648.75 for clarity
  • Key economic data due:
    • Durable Goods Orders (-4.4% vs. -2.2% est. and 0.7% prev.) at 8:30 AM
    • Core Durable Goods Orders ((0.1% vs. 0.4% est. and 0.0% prev.) at 8:30 AM
    • Unemployment Claims (224K vs. 215K est. and 221K prev.) at 8:30 AM
    • Revised UoM Consumer Sentiment (est. 98.4 and 98.3 prev. ) at 10:00 AM
    • Existing Home Sales (est. 5.20M and 51.15M prev. ) at 10:00 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong and Singapore closed up; Tokyo, Sydney, Mumbai and Seoul closed down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/INR
    • Dollar index
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 3.065%, up from November 20 close of 3.048%;
    • 30-years is at 3.317%, up from 3.305%
    • 2-years yield is at 2.812%, up from 2.808%
    • The 10-Year-&-2-Year spread is at 0.253, up from 0.240

Key Levels:

  • Critical support levels for S&P 500 are 2637.66, 2631.52 and 2603.54
  • Critical resistance levels for S&P 500 are 2669.54, 2681.09 and 2696.81
  • Key levels for eMini futures: break above 2666.75, the high of 8:00 AM and break below 2648.75, the low of 6:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (December contract) closed at 2642.50 and the index closed at 2641.89 – a spread of about +0.50 points; futures closed at 2640.00 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures price action is to the upside – at 9:00 AM, S&P 500 futures were up by +19.50; Dow by +148; and NASDAQ by +72.50

Directional Bias Before Open

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

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 16 was a red harami candle with a small upper shadow and very large lower shadow
    • Stochastics (9,1, 3) and RSI (14) turning down – %K again crossed below %D from just below 50 and RSI also turned down from just below 50
    • During the week of October 22, Stochastics reached the lowest since the week of October 31, 2016 and RSI the lowest since the week on Jan 11, 2016
  • Last week was down by -44.74 or -1.6% and ATR is 105.24
  • Last week’s pivot point=2727.67, R1=284.59 R2=2832.91; S1=2679.35, S2=2622.43; S1/S2 pivot levels were breached;
  • A down week; second 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 spinning top red candle that gapped down at the open and the did not fill the gap
    • %K is below %D and near 5
    • Still lower highs and lower lows since October 3; the break above the last lower high of 2816.94 on October 17 was missed by a whisker
  • Below 20-day EMA, 50-day EMA, 100-day SMA, 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Declining since 4:00 PM on November 7; below a downtrend line, which is shallower than the one that was briefly broken to the upside on November 15
  • RSI-9 made a fresh low since the last price high on November 7; rising 8:00 AM on November 20
  • At/below 20-bar EMA, which is below EMA10 of EMA50; both trending down
  • Bias: Down
30-Minute (e-mini future)
  • Declining in steps since 8:00 PM on November 7;
  • RSI-9 rising since making 19.54 at 11:30 AM on November 19; made a bullish divergence at 6:00 PM on November 20; turning down from near 65 to just above 50
  • Above EMA10 of EMA50, which is above 20-bar @MA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways to up since 7:45 PM on November 20
  • The band narrow from midnight o 7:15 AM; expanding slightly since
  • RSI-9 mostly between 40 and 65 since 10:15 AM on November 20
  • Stochastic (9, 1, 3): %K crossed below %D above 90 at 7:45 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Tuesday November 20 in higher volume. Indices opened with a gap down and then increased their losses during the day. Indices also erased the gains for the year with NASDAQ Composite almost unchanged.

From Briefing.com:

The S&P 500 tumbled again on Tuesday with a loss of 1.8%, as economic growth concerns weighed, especially on energy, retail, and technology stocks. Tuesday’s losses wiped out yearly gains for the benchmark index, which is now down 1.2% in 2018.

The Dow Jones Industrial Average lost 2.2%, the Nasdaq Composite lost 1.7%, and the Russell 2000 lost 1.8%.

There is a palpable sense of real angst about the market’s prospects as market commentary is beginning to emphasize the growing risk of a bear market. Commentary has included rising recession risk; widening corporate credit spreads; forecasting message of the sharp losses in cyclical sectors and former leadership stocks/sectors; lack of both gains and buy-the-dip success in November, which call into question the prospects of a seasonal rally; and burgeoning calls to bolster defensive positioning in investment portfolios.

S&P sectors that underperformed the broader market on Tuesday were the cyclical energy (-3.3%), consumer discretionary (-2.2%), information technology (-2.2%), industrials (-2.1%), and financial (-2.1%) sectors.

WTI crude, which has been pressured by ongoing supply concerns, dropped 6.9% to $53.44/bbl and extended its decline to 30.5% from its October 3 high.

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

 

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