Market Remarks

Morning Notes – Monday November 18, 2019

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher, though pulling back since 7:30 AM
  • The odds are for an up to sideways day; watch for break below 3111.75 for change of fortune
  • Key economic data due:
    • NAHB housing Market Index ( 71 est.; prev. 71) at 10:00 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Confirmed Uptrend
  • 120-Min: Up
  • 30-Min: Up
  • 15-Min: Up-Up
  • 6-Min: Up-Side

Key Levels:

  • Critical support levels for S&P 500 are 3112.36, 3104.60 and 3098.20
  • Critical resistance levels for S&P 500 are 3125.75, 3131.02 and 3141.61
  • Key levels for eMini futures: break above 3127.75, the high of 2:00 AM and break below 3111.50, the low of 1:30 PM on Friday

Pre-Open

  • On Friday, at 4:00 PM, S&P future closed at 3119.25 and the index closed at 3120.46 – a spread of about -1.25 points; futures closed at 3118.25 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +0.75; Dow by +42 and NASDAQ by +6.75

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Tokyo and Singapore closed up; Sydney, Mumbai and Seoul were down
  • European markets are mixed – U.K., Spain, Switzerland and STOXX 600 are up; Germany, France and Italy are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • INR/USD
    • Dollar index
    • AUD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Copper
    • Palladium
    • Coffee
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Sugar
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.834%, up from November 14 close of 1.815%;
    • 30-years is at 2.311%, up from 2.297%
    • 2-years yield is at 1.614%, up from 1.597%
    • The 10-Year-&-2-Year spread is at 0.220 up from 0.218
  • VIX
    • Is at 12.38 up from November 15 close of 12.05; below 5-day SMA
    • Recent high was 13.95 on October 31; recent low was 11.92 on November 15

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend resumed
  • September was a green candle with small upper shadow and lower shadow longer than the real body
    • Stochastic %K is above %D and above 90
    • RSI-9 is breaking above a downtrend line from January 2018 high;
    • Rising to the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 is broken in December since then a new high has been made in May 2019
Weekly:
  • The week ending on November 15 was a green candle with almost no upper and lower shadows
    • Breaking above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K is above %D; above 90;
    • RSI (9) is above 70
  • Last week was up +27.38 or +0.9%; the 5-week ATR is 41.49
  • Last week’s pivot point=3105.58, R1=3135.34, R2=3150.22; S1=3090.70, S2=3060.94; R1/R2 pivot levels were breached
  • An up week; fifth in last five weeks and seventh in last ten weeks
  • Last swing low, 2728.81, was the low on June 3, 2018; last swing high was 3027.98, made during the week of July 22
  • Above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A green candle that gapped up at the open with almost no lower and upper shadows
    • %K is crisscrossing %D above 80
    • RSI-9 is above 8-day SMA
  • Broke above a symmetrical triangle, that resembles an ascending triangle, on October 25;
    • Upper bound 3027.98 and lower bound 2898.07; max height almost 130; break point is 3016.00; the 61.8% extension target near 3096.00 is achieved; the 100% extension target is near 3146.00;
  • Above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Moving up since 10:00 AM on November 14 after breaking above a sideway range; uptrend since October 9
    • RSI-21 is moving around 70
    • %K is crisscrossing %D
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 1:30 PM on November 14
    • RSI-21 moving above 50 since 2:00 PM on November 14
    • %K is below %D since 7:30 AM
    • At/below 20-bar EMA but above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 10:00 AM on Friday
  • The Bollinger Band is relatively narrow since 7:15 AM after expanding from 2:00 AM to 7:00 AM
  • Stochastic (9, 1, 3): %K is below %D since 7:30 AM
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Friday, November 15 in mixed volume. Dow Jones Industrial Average and Russell 2000 traded in lower volume. Indices are breaking out though the small caps are lagging.

For the week, major indices mostly closed higher in lower volume. Two S&P sectors – Energy and Finance – closed down for the week.

From Briefing.com:

The stock market rallied higher into record territory on Friday, with risk sentiment fueled by NEC Director Larry Kudlow saying the U.S. and China are close to reaching a Phase One trade agreement. The S&P 500 (+0.8%) closed above the 3100 level, and the Dow Jones Industrial Average (+0.8%) closed above 28,000 — both for the first time.

The Nasdaq Composite (+0.7%) also closed at a record high, while the Russell 2000 (+0.5%) continued to trail its large-cap peers.

[…]

U.S. Treasuries didn’t sell off despite the risk-on mentality in the stock market, but they did edge lower. The 2-yr yield increased three basis points to 1.61%, and the 10-yr yield increased two basis points to 1.83%. The U.S. Dollar Index declined 0.2% to 97.99. WTI crude rose 0.9%, or $0.99, to $57.75/bbl.

[…]

• October retail sales increased 0.3% m/m (Briefing.com consensus +0.2%) following an unrevised 0.3% decline in September. Excluding autos, retail sales jumped 0.2% (Briefing.com consensus +0.4%) after declining an unrevised 0.1% decline in September.
o The key takeaway from the report, other than it shows continued growth in discretionary spending, is that it will be a positive input for Q4 GDP. Core retail sales, which exclude autos, gasoline, building materials, and food services and drinking places sales, and which factor into the goods component of the PCE calculation, were up 0.3%.
• Import prices for October were down 0.5%. Excluding fuel, they were down 0.2%. Export prices were down 0.1%. Excluding agricultural products, they were down 0.3%.
o The key takeaway from the report is that it points to an indolent inflation backdrop.
• Industrial production slumped 0.8% in October (Briefing.com consensus -0.4%) on the heels of an upwardly revised 0.3% decline (from -0.4%) in September. The capacity utilization rate fell to 76.7% (Briefing.com consensus 77.1%) from 77.5% in September.
o The key takeaway from the report is that, while the GM strike had a big impact on industrial production, things were still weak excluding that impact. To wit, the Federal Reserve reports industrial production declined 0.5% excluding motor vehicles and parts.
• Total business inventories were unchanged month-over-month in September (Briefing.com consensus +0.1%) after a downwardly revised 0.1% decline (from 0.0%) in August. Total business sales were down 0.2% following a downwardly revised 0.1% increase (from 0.2%) in August.
o The key takeaway from the report is that the gap between inventory growth on a yr/yr basis (+3.7%) and sales growth (+0.5%) remains, which should help keep prices in check.

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