Morning Notes – Tuesday December 11, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 3:30 AM
  • Odds are for an up day with choppiness and elevated volatility
  • Key economic data due:
    • PPI (0.1% vs. 0.0% est. and 0.6% prev.) at 8:30 AM
    • Core PPI (0.3% vs. 0.1 est. and 0.5% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Mumbai closed up; Tokyo, Seoul and Singapore closed down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • NatGas
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.870%, up from December 10 close of 2.856%;
    • 30-years is at 3.122%, down from 3.129%
    • 2-years yield is at 2.737%, up from 2.729%
    • The 10-Year-&-2-Year spread is at 0.133, up from 1.27

Key Levels:

  • Critical support levels for S&P 500 are 2623.81, 2614.86 and 2596.29
  • Critical resistance levels for S&P 500 are 2649.75, 2664.89 and 2681.36
  • Key levels for eMini futures: break above 2682.25 the high of 11:00 AM on December 7 and break below 2662.25, the low of 8:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (December contract) closed at 2637.50 and the index closed at 2637.72 – a spread of about -0.25 points; futures closed at 2643.00 for the day; the fair value is -5.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up by +30.75; Dow by +305; and NASDAQ by +102.75

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: Down-Side
  • 30-Min: Side-Up
  • 15-Min: Side-Up
  • 6-Min: 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 small green real body with small upper and long lower shadows
    • %K crossing above %D from near 5 and bullish divergence; RSI-9 is also showing bullish divergence
    • 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)
  • Almost similar to that on Monday
  • 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
  • Above 20-bar EMA but below EMA10 of EMA50;
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways to up 4:00 PM on Monday; breaking above a inverted Head-&-Shoulder pattern with 100% extension target near 2700.00
  • RSI-9 is between 40 and 65 since 11:30 AM on December 5; above 60
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways to up since 7:00 PM on Monday
  • The band was narrow from 10:45 PM to 4:00 AM; expanding since then; price moving along the upper band
  • RSI-9 rising since 11:15 AM on Monday from near 30; above 80
  • Stochastic (9, 1, 3): %K crisscrossing above %D above 90
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mixed on Monday December 10.  The volume was mostly lower. Russell 2000, Dow Jones Transportation Average and NYSE Composite closed down and Russell 2000 trade in higher volume.

Major indices gapped down at the open and then traded lower till 11:30 AM, when they staged a turn around and then traded higher for rest of the day. Most indices made small real body candle with long lower shadows and small upper shadows.

From Briefing.com:

The S&P 500 gained 0.2% on Monday in what was yet another volatile day of trading on Wall Street. The benchmark index overcame a loss of 1.9% intraday despite the uncertainty surrounding trade, growth prospects, the path of interest rates, and geopolitics.

Meanwhile, the Dow Jones Industrial Average gained 0.1% after being down as much as 2.1%, Nasdaq Composite gained 0.7% after being down as much as 1.3%, and the Russell 2000 lost 0.3%, though it was down as much as 1.7%.

[…[

Separately, the bond market settled down from last week’s hot streak, pushing yields slightly higher. The 2-yr yield added two basis points to 2.72%, and the 10-yr yield added one basis point to 2.86%.

The U.S. Dollar Index climbed 0.7% to 97.20, benefiting largely at the expense of the British pound, which fell 1.7% to 1.2558 against the dollar as news of the delayed vote on the UK-EU Brexit plan stirred angst about the future of leadership in the UK and the specter of a messy “no deal” Brexit.

Overseas, global equities closed Monday on a lower note amid the uncertainty surrounding global trade issues and Brexit. Japan’s Nikkei led the Asian retreat with a loss of 2.1%, and Germany’s DAX led the European retreat with a loss of 1.5%.

  • 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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