Morning Notes – Monday December 10, 2018

Directional Bias For The Day:

  • S&P Futures are unchanged to lower; drifting mostly up since 6:45 PM on Sunday after gap down open for the week
  • Odds are for a down day with choppiness and elevated volatility
  • No key economic data due:

Markets Around The World

  • Markets in the East closed lower
  • European markets are mostly lower – U.K. is higher
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • GBP/USD
    • USD/CHF
    • USD/INR
  • Commodities:
    Up Down
    • Palladium
    • Coffee
    • Cotton
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.861%, up from December 7 close of 2.850%;
    • 30-years is at 3.132%, down from 3.143%
    • 2-years yield is at 2.729%, up from 2.721%
    • The 10-Year-&-2-Year spread is at 0.129, unchanged

Key Levels:

  • Critical support levels for S&P 500 are 2630.94, 2623.14 and 2621.53
  • Critical resistance levels for S&P 500 are 2649.75, 2664.89 and 2681.36
  • Key levels for eMini futures: break above 2645.00 the high of 8:00 PM on Thursday and break below 2625.00, the low of 7:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (December contract) closed at 2633.50 and the index closed at 2633.08 – a spread of about +0.50 points; futures closed at 2636.00 for the day; the fair value is -2.50
  • Pre-NYSE session open, futures price action is mixed – at 8:45 AM, S&P 500 futures were up by +1.50; Dow down by -4; and NASDAQ up by +4.50

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 15-Min: 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; November was a harami spinning top near the lower end of October
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2% – continues; higher highs and higher lows
Weekly:
  • The week ending on December 7 was a large red candle that engulfed the previous week’s large green candle;  small upper and lower shadows;
    • Stochastics (9,1, 3) and RSI (14) turned down again – %K crossed below %D and is  below 10; RSI is just above 40
    • 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 -127.09 or -4.6% and ATR is 178.65
  • Last week’s pivot point=2684.93, R1=2748.33 R2=2863.58; S1=2569.68, S2=2506.28; R1/S1 pivot levels were breached;
  • A down week; third in last five weeks and sixth 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; below 89-week SMA (first since June 27, 2016)
  • Uptrend Under Pressure
Daily
  • A large red bearish engulfing candle with small and equal sized upper and lower shadows
    • %K is below %D and below 10
    • Sequence of lower highs and lower lows since October 3 2018
  • Below 20-day EMA , 50-day EMA, below 100-day SMA and 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Futures are below a downtrend line from December 3 high; declining in steps i.e. lower highs and lower lows;  but rising since 6:00 PM on December 9
  • RSI-9 rising since 6:00 PM on Sunday after making another bullish divergence
  • Below 20-bar EMA but below EMA10 of EMA50;
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving up since 7:30 PM on Sunday
  • RSI-9 is between 40 and 65 since 11:30 AM on December 5; above 60
  • Above 20-bar EMA ; at/above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways to up since 10:45 PM on December 9
  • The band was narrow from 10:45 AM to 2:00 AM; expanding since then; price moving along the upper band
  • RSI-9 rising since 7:45 AM on Sunday
  • Stochastic (9, 1, 3): %K crossed below %D from above 95 at 8:30 AM and after making a bearish divergence
  • Bias: Side

Previous Session

Most major U.S. indices closed sharply lower on Friday December 7.  The volume was mixed. NASDAQ Composite and Dow Jones Transportation Average traded in higher volume. The candlestick pattern for major indices was bearish engulfing.

For the week, major U.S. indices closed down with increased volume. Dow Jones Industrial Average traded in lower volume. Major indices made bearish engulfing pattern on weekly charts. Most S&P sectors also closed down. Only Utilities and Real Estate closed green for the week.

From Briefing.com:

The S&P 500 fell 4.6% this week, as global growth concerns were exacerbated by negative developments regarding U.S-China trade negotiations and the continued flattening of the U.S. Treasury yield curve. The Dow Jones Industrial Average lost 4.5%, the Nasdaq Composite lost 4.9%, and the Russell 2000 lost 5.6%.

[…]

In addition, the news of the arrest of Huawei Technologies’ CFO Meng Wanzhou heightened these burgeoning trade concerns. Ms. Meng was arrested Dec. 1 in Canada amid allegations that the company violated U.S. trade sanctions on Iran. Her arrest invited worries about trade negotiations going awry in the 90-day window and potential retaliation against U.S. companies doing business in/with China.

Economic growth concerns were cast into the spotlight by a decisive curve-flattening trade in the Treasury market that featured some inversions on the short end. The 2-yr yield (2.70%) and 3-yr yield (2.71%) closed higher than the yield on the 5-yr Treasury note (2.69%) this week.

Also, the difference between the 2-yr and 10-yr yields narrowed to its slimmest margin since 2007. Specifically, the 2-yr yield lost 11 basis points to 2.70%, and the 10-yr yield lost 16 basis points to 2.85%.

[…]

The worst-performing sectors this week were the financials (-7.1%), industrials (-6.3%), materials (-5.2%), information technology (-5.1%), and health care (-4.6%) sectors. The only two sectors that escaped the week with a gain were the utilities (1.3%) and real estate (0.3%) sectors.

[…]

Transport stocks, in particular, weighed on the trade-sensitive industrial sector. The Dow Jones Transportation Average dropped 8.0% this week.

[…]

The energy sector (-3.1%) was down for the week, yet it outperformed the broader market, helped by a 3.1% bump in oil prices to $52.52 per barrel.

[…]

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