Morning Notes – Tuesday December 18, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 0:30 AM; near a downtrend line from the high at 10:00 AM  on December 13;
  • Odds are for an up day but mostly sideways from pre-open levels – watch for break above 2576.00 and break below 2552.25 for clarity;
  • Key economic data due:
    • Building Permits ( 1.33M vs. 1.27M est. and 1.27M prev.) at 8:30 AM
    • Housing Starts (1.26M vs. 1.23M est. and 1.22M prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai was up
  • European markets are mostly lower – Germany and Italy 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
    • NatGas
    • Gold
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.837%, down from December 17 close of 2.857%;
    • 30-years is at 3.090%, down from 3.114%
    • 2-years yield is at 2.671%, down from 2.696%
    • The 10-Year-&-2-Year spread is at 0.166, up from 0.161

Key Levels:

  • Critical support levels for S&P 500 are 2530.54, 2521.58 and 2507.35
  • Critical resistance levels for S&P 500 are 2562.62, 2576.03 and 2600.91
  • Key levels for eMini futures: break above 2576.75, the high of 1:00 PM on Monday and break below 2562.00, the low of 6:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (January contract) closed at 2551.50 and the index closed at 2545.94 – a spread of about +4.00 points; futures closed at 2555.75 for the day; the fair value is -4.25
  • Pre-NYSE session open, futures price action is to the upside – at 7:30 AM, S&P 500 futures were up by +16.50; Dow by +147; and NASDAQ by +49.75

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: 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 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 ; broke below  support created by past 3-months lows; broke below February 2018 lows
    • %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 again below a downtrend line from December 3 high that they broke above once at 8:00 AM on December 12; declining in steps i.e. lower highs and lower lows;
  •  RSI-9 made three lows since 2:00 PM on December 14 and made bullish divergences
  • 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 rising from a low of 19.3 at 3:00 PM on December 17; just above 50
  • At/above 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways to up since 7:30 PM on Monday
  • The band is relatively narrow since 2:45 AM
  • RSI-9 moving up since 3:30 PM on Monday from near 20; just above 50
  • Stochastic (9, 1, 3): %K is crisscrossing %D above 50 since 1:15 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Monday December 17. Indices broke below recent lows, which were acting as support. Major indices, except Dow Jones Industrial Average and NASDAQ Composite, broke below prior 2018 lows. The volume was higher.

From Briefing.com:

The S&P 500 lost 2.1% on Monday, as uncertainty surrounding a host of issues continued to drive an inclination to sell into strength and to reduce risk exposure to stocks. The benchmark index (2545.94) ran into resistance at the 2600 level amid a morning rebound effort before steadily backpedaling throughout the afternoon and re-testing its February low (2532.69). That re-test invited some late buying interest that enabled the indices to close off their worst levels of the day.

The Dow Jones Industrial Average (-2.1%), the Nasdaq Composite (-2.3%), and the Russell 2000 (-2.3%) also squandered intraday rebound efforts to finish near session lows. The tech-sensitive Nasdaq is now negative for the year, and the small-cap Russell 2000 has fallen more than 20.0% from its yearly high.

The degree of pessimism is picking up noticeably, evidenced by the widespread de-risking activity. No sector was safe today. All 11 sectors ended in negative territory, with losses ranging from 1.0% (financials) to 3.7% (real estate).

[…]

Softening economic data also fueled concerns about the growth outlook and compounded the market’s negative bias. The NAHB Housing Market Index for December fell from 60 to 56 (Briefing.com consensus 61), which is its lowest level in nearly four years. The Empire Manufacturing Index for December, meanwhile, dropped to 10.9 (Briefing.com consensus 20.0) from 23.3.

[…]

  • 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 Cross-Under
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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