Morning Notes – Wednesday November 28, 2018

Directional Bias For The Day:

  • S&P Futures are higher; trending up since 8:30 AM on Tuesday;  moving sideways to down since 7:30 AM
  • Odds are for an up day – watch for break below 2689.00 for change of fortune
  • Key economic data due:
    • Prelim GPD (3.5% vs. 3.6% est. and 3.5% prev.) at 8:30 AM
    • Good Trade Balance (-77.2B vs. -76.7B est. and -76.3B prev.) at 8:30 AM
    • New Home Sales (est. 583K and prev. 553K) at 10:00 AM
    • Fed Chair Powell Speech at 12:00 PM

Markets Around The World

  • Markets in the East closed mostly higher – Sydney closed down
  • European markets are mostly higher – U.K is lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Palladium
    • Sugar
    • Cotton
    • Crude Oil
    • Platinum
    • Coffee
    • Cocoa (Unch.)
  • Bonds
    • 10-yrs yield is at 3.063%, up from November 27 close of 3.055%;
    • 30-years is at 3.319%, unchanged
    • 2-years yield is at 2.843%, up from 2.839%
    • The 10-Year-&-2-Year spread is at 0.220, up from 0.216

Key Levels:

  • Critical support levels for S&P 500 are 2674.42, 2664.41 and 2655.89
  • Critical resistance levels for S&P 500 are 2696.81, 2701.96 and 2717.48
  • Key levels for eMini futures: break above 2697.25, the high of 7:30 AM and break below 2689.00, the low of 6:30 AM


  • On Tuesday, at 4:00 PM, S&P future (December contract) closed at 2682.50 and the index closed at 2682.17 – a spread of about +0.25 points; futures closed at 2683.50 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up by +12.25; Dow by +164; and NASDAQ by +42.75

Directional Bias Before Open

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

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

  • 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
  • The week ending on November 23 was a large red candle with a small lower shadow and almost no upper 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
  • A relatively large green candle that opened near the middle of previous day’s real body and closed above it high; small lower shadow and almost no upper shadow
    • %K crossed above %D on November 26 from around 1
    • 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)
  • Rising since 8:00 AM on November 23 after RSI-9 made a bullish divergence; broke above a downtrend line from November 8 high at 4:00 PM on Tuesday; broke a sequence of lower high and lower high since November 8
  • RSI-9 rising since 8:00 AM on November 20; made a bullish divergence at 12:00 PM on November 23
  • Above 20-bar EMA, which is above EMA10 of EMA50; both turned up
  • Bias: Side-Up
30-Minute (e-mini future)
  • Rising since 8:30 AM on November 23;
  • Broke above a horizontal channel – high 2671.25 and low 2627.00 – the 61.8% extension target is near 2689.00 and the 100% extension target is near 2715.00
  • RSI-9 mostly above 40 since November 23; occasional breaks above 65; above 50 since 12:00 PM on November 27
  • Above 20-bar EMA , which is above EMA10 of EMA50; both rising
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting up since 8:30 AM on November 23 with periodic sideways moves
  • The band was narrow from 10:00 PM to 00:45 AM; expanding since; the pace of range expansion increasing since 6:30 AM
  • RSI-9 rising from near 40 at 3:30 AM; just below 65
  • Stochastic (9, 1, 3): %K crisscrossing %D from below 10 at 3:30 AM; crossed below %D at 8:30 AM after making a bearish divergence
  • Bias: Up

Previous Session

Major U.S. indices closed mostly higher on Tuesday November 27. Russell 2000 closed down. The volume was mixed. Dow Jones Industrial Average and Dow Jones Transportation Average traded in higher volume. S&P 500, NASDAQ and Russell 2000 traded in lower volume.


The S&P 500 recouped losses to finish with a gain of 0.3% in a volatile session on Tuesday. The stock market was able to shrug off early angst caused by President Donald Trump reiterating his hard-nosed tariff stance.


Meanwhile, the Dow Jones Industrial Average gained 0.4%, the Nasdaq Composite finished flat, and the Russell 2000 underperformed with a loss of 0.9%.


Subsequently, the trade-sensitive materials (-1.3%) and industrial (-0.2%) sectors underperformed the broader market. The energy group (-0.3%) also finished near the bottom of the sector standings.


On the other hand, the stock market assumed a defensive tone on Tuesday with the defensive-oriented health care (+1.0%), utilities (+0.9%), and consumer staples (+0.9%) sectors finishing with strong gains. The real estate (+0.6%) and communication services (+0.6%) sectors also had solid showings.


In the bond market, U.S. Treasuries finished on a modestly higher note with the belly of the curve showing relative strength. The 2-yr yield was unchanged at 2.83%, and the 10-yr yield decreased two basis points to 3.06%.

Overseas, European equities finished modestly lower on Tuesday with Germany’s DAX (-0.4%) showing relative weakness. Elsewhere, Asian equity markets finished mixed with China’s Shanghai Composite unchanged.


The key takeaway from the report [Conference Board’s Consumer Confidence] is that consumer confidence remains at historically strong levels due in large part to positive views on the labor market.

  • 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 Side 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 Below
Real Estate Up XLRE XLRE Cross – Over
Telecom Down SPY SPY Below


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