Morning Notes – Friday December 14, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving higher since 4:30 AM
  • Odds are for a down day with choppiness and elevated volatility – watch for break above 2631.00 for change of fortune
  • Key economic data due:
    • Core Retail Sales (0.2% vs. 0.2% est. and 1.0% prev.) at 8:30 AM
    • Retail Sales (0.2% vs. 0.1% est. and 1.1% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai closed up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.892%, down from December 13 close of 2.914%;
    • 30-years is at 3.147%, down from 3.170%
    • 2-years yield is at 2.745%, up from 2.757%
    • The 10-Year-&-2-Year spread is at 0.147, up from 0.133

Key Levels:

  • Critical support levels for S&P 500 are 2637.27, 2621.3 and 2614.86
  • Critical resistance levels for S&P 500 are 2655.51, 2670.19 and 2685.44
  • Key levels for eMini futures: break above 2625.75 the high of 6:30 AM and break below 2613.50, the low of 4:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (December contract) closed at 2649.50 and the index closed at 2650.54 – a spread of about +1.00 points; futures closed at 2645.50 for the day; the fair value is +4.00
  • Pre-NYSE session open, futures price action is to the downside – at 8:30 AM, S&P 500 futures were down by -17.50; Dow by -175; and NASDAQ by -41.50

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: Side-Down
  • 30-Min: Side-Down
  • 15-Min: Down
  • 6-Min: Down-Side

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 spinning top red candle; bullish gulfing of red real bodied candle on Wednesday but was completely within the larger red candle of Tuesday
    • %K is 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 stay above a downtrend line from December 3 high that they broke above at 8:00 Am on December 12; declining in steps i.e. lower highs and lower lows; a move above 2678.00 will break the sequence
  • RSI-9 declining since 10:00 AM on December 12
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Moving mostly down higher since 1:00 PM on December 13;
  • RSI-9 is mostly below 40 since 7:30 PM on December 13; just above 40
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving down since 9:15 PM on Wednesday
  • The band was a bit narrow from 0:45 AM to 3:00 AM; expanding since then; price moving along the lower band till 4:45 AM; approaching the upper band
  • RSI-9 rising since 3:45 AM from near 25; made a bullish divergence at 4:45; just above 50
  • Stochastic (9, 1, 3): %K is crisscrossing %D since 6:00 AM near 80
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Thursday December 13. The volume was mostly lower too. Dow Jones Industrial Average closed higher and Dow Jones Transportation Average traded in higher volume. Most indices closed below their open and with real body within the large real body of Tuesday.

From Briefing.com:

The U.S. major indices finished mixed on Thursday, as ongoing uncertainty surrounding global issues kept many buyers on the sidelines. The S&P 500 finished flat, the Nasdaq Composite lost 0.4%, and the Dow Jones Industrial Average gained 0.3%.

In particular, the continued weakness from the Dow Jones Transportation Average (-1.6%), S&P 500 financial sector (-0.6%), and small-cap Russell 2000 (-1.6%), all of which play a key role in driving sentiment on the domestic economic outlook, and some cautious-sounding commentary on the economic outlook from European Central Bank President Draghi following today’s ECB policy meeting, subdued investor confidence.

Concerns over slowing economic growth, and its adverse effect on corporate earnings, helped contribute to investors assuming some defensive positioning within the stock market.

[…]

Separately, retail stocks were one of the hardest hit groups on Thursday, which helped drive the weakness in the consumer discretionary (-0.4%) sector. The SPDR S&P Retail ETF (XRT 42.52, -1.17) lost 2.7%.

[…]

Reviewing Thursday’s economic data, which included Export and Import Prices for November, weekly Initial and Continuing Claims, and the Treasury Budget for November:
[…]

The key takeaway from the report is that it stirred some thinking that inflation trends could be in a topping phase, which is constructive in terms of the market’s belief that the Federal Reserve is apt to take a more conservative path 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 Above
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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