Morning Notes – Wednesday December 12, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 3:00 AM
  • Odds are for an up day with choppiness and elevated volatility
  • Key economic data due:
    • CPI (0.0% vs. 0.0% est. and 0.0% prev.) at 8:30 AM
    • Core CPI (0.2% vs. 0.2% est. and 0.2% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed up
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • Dollar index
    • NZD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cocoa
    • NatGas
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.908%, up from December 11 close of 2.879%;
    • 30-years is at 3.149%, up from 3.129%
    • 2-years yield is at 2.779%, up from 2.767%
    • The 10-Year-&-2-Year spread is at 0.129, up from 0.112

Key Levels:

  • Critical support levels for S&P 500 are 2636.19, 2621.3 and 2614.86
  • Critical resistance levels for S&P 500 are 2673.31, 2681.36 and 2703.22
  • Key levels for eMini futures: break above 2678.00 the high of 8:30 AM on December 11 and break below 2662.50, the low of 8:00 AM


  • On Tuesday, at 4:00 PM, S&P future (December contract) closed at 2637.75 and the index closed at 2636.78 – a spread of about +1.00 points; futures closed at 2641.25 for the day; the fair value is -3.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up by +31.75; Dow by +309; and NASDAQ by +97.75

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: Side-Up
  • 30-Min: Side-Up
  • 15-Min: Side-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; 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
  • 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
  • A large red candle with small upper and lower shadows; a potential morning star pattern
    • %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)
  • Futures trying to break above a downtrend line from December 3 high; declining in steps i.e. lower highs and lower lows; a move above 2678.00 will break the sequence
  • RSI-9 rising since 6:00 PM on Sunday after making another bullish divergence
  • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving gradually higher since 11:00 AM on Tuesday; futures are at a level that they were on Tuesday pre-open session;
  • RSI-9 is mostly between 40 and 65 since 11:30 AM on December 5; again 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 6:30 PM on Tuesday
  • The band was a bit narrow from 0:15 AM to 3:00 AM; expanding since then; price moving along the upper band
  • RSI-9 rising since 2:45 AM from near 40; above 65
  • Stochastic (9, 1, 3): %K crisscrossing above %D near 90
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly lower on Tuesday December 11.  The volume was lower. NASDAQ Composite closed up. The indices gapped up at the open but then turned down at 10:30 AM and reached negative territory by mid-day. The indices recovered most of the loss by the close.


The S&P 500 finished flat on Tuesday, squandering two intraday rally efforts, as headline volatility surrounding politics and trade contributed to another day of whipsaw trading action.

The benchmark index traded as high as 1.4% shortly after the start of trading, but surrendered the entirety of that gain and was down as much as 0.6% in the afternoon. It mounted a late recovery charge, trading up as much as 0.8%, but then rolled over in the last 30 minutes. Fittingly, the S&P 500 closed just about where it began, underscoring the lack of conviction on the part of buyers and sellers.

The Dow Jones Industrial Average (-0.2%), Nasdaq Composite (+0.2%), and Russell 2000 (-0.2%) also took similar paths, but the Nasdaq was able to hold onto a slim gain.


Reviewing Tuesday’s economic data, which included the Producer Price Index for November and the NFIB Small Business Optimism Index for November:


The key takeaway from the report is that it didn’t inflame inflation concerns to an alarming degree, like the October report did, so market participants have not been bothered by the idea that it will drive the Federal Reserve to be overly aggressive with future rate hikes.

  • 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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