Morning Notes – Wednesday December 19, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 4:30 PM on Tuesday;
  • Daily and weekly trend is down but futures are ripe for a bounce
  • Odds are for an up day with choppiness and elevated volatility – watch for break below 2545.50 for change of fortune;
  • Key economic data due:
    • Existing Home Sales ( est. 5.20M and 5.22M prev.) at 10:00 AM
    • FOMC Economic Projections at 2:00 PM
    • FOMC Statement at 2:00 PM
    • Fed Funds Rate at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo and Sydney closed down; Hong Kong, Mumbai, Seoul and Singapore closed up
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Silver
    • Copper
    • Sugar
    • Coffee
    • Cocoa
    • NatGas
    • Gold
    • Platinum
    • Palladium
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.810%, down from December 18 close of 2.819%;
    • 30-years is at 3.063%, down from 3.071%
    • 2-years yield is at 2.671%, down from 2.696%
    • The 10-Year-&-2-Year spread is at 0.160, down from 0.166

Key Levels:

  • Critical support levels for S&P 500 are 2528.71, 2521.58 and 2507.35
  • Critical resistance levels for S&P 500 are 2559.35, 2572.45 and 2600.91
  • Key levels for eMini futures: break above 2562.50, the high of 7:00 AM and break below 2550.50, the low of 3:30 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2548.75 and the index closed at 2546.16 – a spread of about +2.50 points; futures closed at 2538.00 for the day; the fair value is +10.75
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up by +16.50; Dow by +162; and NASDAQ by +37.50

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 relative small red real bodied candle within the larger red real bodied candle of Monday; small upper shadow and a bit longer lower shadows
    • %K turning above %D from near 5; bullish divergence
    • RSI-9 is flattening near 30
    • 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 are 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; rising since 4:00 PM on Tuesday
  •  RSI-9 made three lows since 2:00 PM on December 14 and has made two bullish divergences since then
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving up since making a low at 2530.00, just below Monday’s low of 22533.50; near Tuesday’s close after declining by more than 20 points
  • RSI-9 rising since 2:30 PM on Tuesday and made bullish divergence twice
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving up since 8:30 PM on Tuesday
  • The band narrowed from 8:00 PM 4:30 AM; expanding slightly since then; price first moved along the upper band and are moving along the lower band since 8:00 AM\
  • RSI-9 moving down since 7:00 AM from just above 65; just above 40
  • Stochastic (9, 1, 3): %K is crisscrossing %D downward since 7:00 AM from just below 90
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mixed on Tuesday December 18. Russell 2000, NYSE Composite and Wilshire 5000 Total Market Index closed down. S&P 500 was barely changed and other were higher. The volume was mostly lower. Russell 2000 traded in higher volume.

Indices gapped up at the open and then traded higher till mid-day when they turned down and gave up a large portion of day’s gains.

From Briefing.com:

The S&P 500 finished flat on Tuesday in what was another roller-coaster session, driven by shifts in sector leadership, a 7.2% plunge in oil prices to $46.57 per barrel, and lingering uncertainty surrounding trade, monetary policy, the economic growth outlook, and the budget battle in Washington to keep the government open.

The benchmark index was up as much as 1.1% in early action, bolstered by some technical buying after the S&P 500 managed to hold support at its February low (2532.69) on Monday. That rally, however, would not hold up.

[…]

The Dow Jones Industrial Average (+0.4%) and the Nasdaq Composite (+0.5%) managed to squeeze out some modest gains, yet they also finished well off their best levels of the day. The Russell 2000 shed 0.1%.

The S&P 500 sectors were mixed with consumer discretionary (+1.0%) and real estate (+1.0%) on the winning end, and energy (-2.4%) and consumer staples (-1.2%) on the losing end.

The S&P 500 financial sector (-0.5%) was another notable laggard and it stood out as the poster child for selling into strength.

[…]

Also weighing on sentiment was the fact that oil prices continued to get clobbered amid ongoing concerns over excess supply and slowing economic growth. WTI crude dropped 7.2% to $46.57/bbl, closing at its lowest level since September 2017. The oil-sensitive energy sector underperformed with a loss of 2.4%.

[…]

Those concerns, and concerns about the stock market’s fortunes, showed up in the gains registered by the Treasury market and CBOE Volatility Index (VIX 25.58, +1.06, +4.3%) even while stocks were rallying. The Fed-sensitive 2-yr yield lost four basis points to 2.66%, and the benchmark 10-yr yield lost three basis points to 2.82%. The U.S. Dollar Index lost 0.1% to 97.05.

[…]

The key takeaway from the report is that it substantiates the weakening levels of homebuilder confidence and is a reflection of the impact rising interest rates are having on single-family construction activity.

[…]

  • 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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