Morning Notes – Tuesday October 16, 2018

/ October 16, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 6:00 PM on Monday
  • A symmetrical triangle is forming on 30-minute chart; a break above 2775.00 wil be bullish and a break below 2755.00 will be bearish
  • Odds are for an up day with increased volatility
  • Key economic data due:
    • Industrial Production (est. 0.2%) at 9:15 AM
    • Capacity Utilization (est. 78.2%) at 9:15 AM

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Singapore were down; Seoul was closed
  • European markets are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • Dollar index
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
    • Sugar
  • Bonds
    • 10-yrs yield closed at 3.163% on October 15, up from October 12 close of 3.141%;
    • 30-years is at 3.341%, up from 3.316%
    • 2-years yield is at 2.857%, up from 2.853%
    • The 10-Year-&-2-Year spread is at 0.306, up from 0.288

Key Levels:

  • Critical support levels for S&P 500 are 2750.69, 2745.15 and 2732.66
  • Critical resistance levels for S&P 500 are 2775.05, 2784.11 and 2795.14
  • Key levels for eMini futures: break above 2777.50, the high of 3:00 PM on October 15 and break below 2755.50, the low of 5:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (December contract) closed at 2753.00 and the index closed at 2750.79 – a spread of about +2.25 points; futures closed at 2749.00 for the day; the fair value is +4.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up +17.75; Dow by +179; and NASDAQ by +66.25

Directional Bias Before Open

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

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

Monthly
  • Confirmed Uptrend
  • December 2017 closed higher; index has been higher for the nine straight months; it has only one down month, March 2017, since October 2016
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2%
Weekly:
  • The week ending on October 12 was a large red candle, following a bearish engulfing candle, which breached many weeks’ low; the lower shadow was twice the size of upper shadow and two-third the size of the real body
    • Stochastics (9,1, 3) and RSI (14) continue to decline following their bearish divergences
  • Last week’s pivot point=2790.82, R1=2871.14 R2=2975.14; S1=2686.82, S2=2606.50; S1/S2/S3 pivot levels were breached;
  • Third down week in a row; third in last five weeks and fifth in last ten weeks
  • Broke above an ascending triangle but retraced back to its upper limit; 100% extension target is near 3070.00 level
  • 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 is near 2913.13
  • 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, 2322.25, was the low on March 27, 2017; Last swing high, 2872.87, was during the week of January 22, 2-018; the low since the last swing high is 2532.69 during the week if February 5, 2018
  • At 10-week EMA; above 39-week SMA and above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A red real body with almost no lower shadow and small upper shadow, that stayed within the extremes of previous two days’ candles
  • %K is still above %D from oversold levels, though it dipped towards it
  • Below 20-day EMA, 50-day EMA and 100-day SMA; at/below 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Forming a symmetrical triangle at the low end of sharp decline of past few days; a break below its will make it a pennant formation and a break above it will start a bounce
  • RSI-9 continue to rise form a low of 8.07 at 10:00 PM on October 10; bullish divergence at 2:00 PM on October 11
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Mostly moving sideways since 6:30 PM on October 11 between 2784.50 and 2732.25; a symmetrical triangle emerging; break above 2775.00 will continue the bounce from lows and a break below 2755.00 may continue the downtrend
  • RSI-9 mostly between 40 and 65 since 2:30 AM on October 11 with few forays below
  • Above 20-bar EMA, which is at/above 20-bar EMA – both almost flat
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 0:15 AM on October 11 with alternatively showing slight up or down biases for few hours
  • The band is mostly narrow since 10:00 PM on Monday
  • RSI-9 between 40 and 65 since 5:00 AM on Monday
  • The Stochastic (9, 1, 3): %K is crossed above %D from below 10 at 5:30 AM; crisscrossing %D higher
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Monday October 15. The volume was lower than Friday’s volume but above day’s before the market turmoil. Russell 2000 and Dow Jones Transportation Average closed higher and other closed down.

Six of the S&P Sectors – Consumer Discretionary, Energy, Materials, Finance, Technology and Healthcare – were down. But only three sectors – XLE, XLK and XLV performed worse than SPY..

From Briefing.com:

U.S. stocks oscillated around the S&P 500’s flat line on Monday before whipping noticeably lower in the final hour of trading. Renewed weaknesses in the information technology (-1.6%) and financials (0.5%) sectors coupled with ongoing concerns about the global economic growth outlook kept follow-through buying interest from Friday’s rally in check.

The S&P 500 lost 0.6% and closed below its 200-day moving average (2766.54), which is considered to be a key technical level. The tech-heavy Nasdaq Composite lost 0.9% and the Dow Jones Industrial Average lost 0.4%. Meanwhile, the small-cap Russell 2000 outperformed, climbing 0.6%.

[…] Treasury yields remained near their starting levels. The 2-yr note yield ticked one basis point higher to 2.85%, and the 10-yr note yield rose two basis points to 3.16%.

[…] merger news contributed to the relative strength of the industrials sector (+0.2%), which joined with the defensive-oriented consumer staples (+0.6%), real estate (+0.5%), and utilities (+0.4%) sectors to buck Monday’s weakness in the broader market.

  • S&P 500 Sectors
Sector Daily Trend Relative Strength (Last Month) Relative Strength (Current)
Consumer Discretionary Down (Break below trading zone – 114.80) XLY SPY
Consumer Staples Side (Break Down Support = 53.49) SPY XLP
Energy Up (From Side) SPY XLE
Materials Side SPY SPY
Industrials Up-Side XLI XLI
Finance Side SPY XLF
Technology Up (Under Pressure) XLK SPY
Utility Up-Side SPY XLU
Heath Care Up (under Pressure) XLV SPY
Real Estate Down SPY SPY
Telecom Side XTL SPY

 

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