Morning Notes – Monday December 17, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 9:30 PM on Sunday; below Friday’s low
  • Odds are for a down day with choppiness and elevated volatility – watch for break above 2605.00 for change of fortune
  • Key economic data due:
    • Empire State Manufacturing Index (10.9 vs. 20.1 est. and 23.3 prev.0.2% vs. 0.2% est. and 1.0% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly higher – Hong Kong  closed down
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Palladium
    • NatGas
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.888%, down from December 14 close of 2.891%;
    • 30-years is at 3.144%, down from 3.143%
    • 2-years yield is at 2.741%, unchanged
    • The 10-Year-&-2-Year spread is at 0.147, down from 0.150

Key Levels:

  • Critical support levels for S&P 500 are 2593.84, 2583.23 and 2573.61
  • Critical resistance levels for S&P 500 are 2603.26, 2619.04 and 2635.07
  • Key levels for eMini futures: break above 2605.00, the high of 7:00 AM and break below 2591.00, the low of 8:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2604.00 and the index closed at 2599.95 – a spread of about +4.00 points; futures closed at 2605.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures price action is to the downside – at 9:00 AM, S&P 500 futures were down by -10.25; Dow by -125; and NASDAQ by -23.75

Directional Bias Before Open

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

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 14 was a red candle with a real body completely below the real body of previous’ week’s red candle; upper shadow almost double of the lower shadow, which is equal to real body in size;
    • Stochastics (9,1, 3) and RSI (14) turned down again – %K crossed below %D and is  below 10; RSI has turned down too and is just above 40
    • The 38.2% Fibonacci retracement level from the rally from February 2016 low is near 2508.00
    • 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; %K is below that level but the RSI is above
  • Last week was down -33.13 or -1.3% and ATR is 102.21
  • Last week’s pivot point=2622.87, R1=2662.52 R2=2725.08; S1=2560.31, S2=2520.66; No 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 real bodied candle with small upper and lower shadows ; very near the lows made on December 10, which was looking like a reversal day
    • %K turned below %D from just above 20; below 10; near 5 and bullish divergence; RSI-9 is falling below 40 and is below its level on December 12
    • 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
  • In Correction
2-Hour (e-mini future)
  • Futures moving down along 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; near 25
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving mostly down higher since 1:00 PM on December 13;
  • RSI-9 mostly below 50 since December 12; below 30
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving down since 9:15 PM on December 12
  • The band was narrow from 1:00 AM to 2:15 AM; expanding since then; price mostly moving along the lower band
  • RSI-9 trending down since 9:30 P on December 16; just below 25
  • Stochastic (9, 1, 3): %K is crisscrossing %D since 6:00 AM near 20
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Friday December 14. The volume was mostly higher. Dow Jones Transportation Average traded in lower volume. Market gapped down at the open and then trade lower for the rest of the day.

For the week, the major U.S. indices closed lower in mostly higher volume. S&P 500 traded I lower volume than previous week. Only Utility sector was up for the week.

From Briefing.com:

Wall Street suffered another down week, as continued uncertainty surrounding economic growth, trade, politics, and the path of interest rates kept many buyers on the sidelines. Heightened trading volatility also proved effective in keeping buyers sidelined, too, as large intraday swings proved exhausting and off-putting for many participants.

The S&P 500 lost 1.3%, the Dow Jones Industrial Average lost 1.2%, and the Nasdaq Composite lost 0.8%.

Tempering hope that last week’s sell-off created a “tradable” bottom was the continued weakness in the Dow Jones Transportation Average (-4.4%), S&P 500 financial sector (-3.5%), and small-cap Russell 2000 (-2.6%) — all of which play a key role in driving sentiment on the domestic economic outlook. For the month, these groups are down 12.1%, %, and z%, respectively.

[…]

The S&P 500 energy (-3.3%), health care (-1.9%), and real estate (-1.8%) sectors were some of the hardest-hit groups this week.

[…]

Energy stocks struggled as oil prices pulled back. WTI crude fell 2.5% this week to $51.27/bbl.

Not all was bad, though. The S&P 500 information technology (-0.02%) ended the week roughly flat while the communication services (+0.5%) and utility (+0.6%) sectors were able to finish in the green this week.

Recent demand for Treasuries cooled off, giving yields a slight bump. The Fed-sensitive 2-yr yield rose three basis points to 2.73%, and the benchmark 10-yr yield rose four basis points to 2.89%. Meanwhile, the U.S. Dollar Index rose 0.4% to 97.45.

  • 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 Cross-Under
Telecom Down SPY SPY Below
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