Morning Notes – Wednesday October 17, 2018

/ October 17, 2018

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 3:00 AM after making a high of 2821.00 a bearish divergence on 30-minute and 120-minute timeframes
  • Odds are for a sideways and choppy day with good chances to go or down; elevated volatility
  • Key economic data due:
    • Building Permits (1.24M vs. 1.27M est.) at 8:30 AM
    • Housing Starts (1.20M vs. 1.22M est.) at 8:30 AM
    • FOMC Meeting Minutes at 2:00 AM

Markets Around The World

  • Markets in the East closed mostly higher – Mumbai was down; Hong Kong was closed
  • European markets are mostly down – U.K. is up
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Silver
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • Crude Oil
    • Gold
    • Platinum
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.152%, down from October 16 close of 3.156%;
    • 30-years is at 3.320%, down from 3.330%
    • 2-years yield is at 2.866%, down from 2.606%
    • The 10-Year-&-2-Year spread is at 0.286, up from 0.250

Key Levels:

  • Critical support levels for S&P 500 are 2798.57, 2788.29 and 2772.84
  • Critical resistance levels for S&P 500 are 2813.46, 2830.23 and 2843.89
  • Key levels for eMini futures: break above 2812.75, the high of 7:00 AM and break below 2804.00, the low of 8:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (December contract) closed at 2811.00 and the index closed at 2809.92 – a spread of about +1.00 points; futures closed at 2817.75 for the day; the fair value is -6.75
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down -11.25; Dow by -122; and NASDAQ by -41.50

Directional Bias Before Open

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

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 relatively large green body with almost no lower shadow and small upper shadow
  • %K is rising above %D from oversold levels
  • Below 20-day EMA, 50-day EMA and 100-day SMA; above 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Broke above a symmetrical triangle at the low end of sharp decline of past few days; the 61.8% extension target near 2816.00 is achieved; 100% extension target is near 2850.00
  • RSI-9 made a bearish divergence at 2:00 AM; declining from a high of 80.62 at 10:00 PM to below 65
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Mostly moving sideways since 4:00 PM on October 16; rounding down from a high of 2821.00; below a downtrend line; next big support near 2798.75
  • RSI-9 made a bearish divergence at 2:30 PM; declining since the high of 84.15 at 4:00 PM to just below 40
  • Below 20-bar EMA but above 20-bar EMA – both almost flat
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 6:15 PM on October 16
  • The band was narrow from 9:30 PM to 2:00 AM; expanding since with price mostly moving along the lower band
  • RSI-9 declining from a high of 85.89 at 1:30 PM on October 16 to near 30
  • The Stochastic (9, 1, 3): %K is trending down; crossed below %D at 7:15 AM after a rise to 75.86 at 7:00 AM from 2.63 at 4:00 AM
  • Bias: Side-Down

Previous Session

Major U.S. indices closed sharply higher on Tuesday October 15. The volume was higher from Monday. 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.

All S&P Sectors were up but only three – Technology, Healthcare and Telecom – performed better than SPY.

From Briefing.com:

Stocks cruised considerably higher on Tuesday, ignited by strong earnings at the open and then fueled by a resurgence in the heavily-weighted information technology sector (3.0%) throughout the day. The S&P 500 rocketed through its 200-day moving average, closing 2.2% higher and reducing its October loss to 3.6%.

As for the other major averages, the Dow Jones Industrial Average jumped 2.2%, the Nasdaq Composite surged 2.9%, and the Russell 2000 advanced 2.8%. The Dow and the Nasdaq both closed above their 200-day moving averages, but the Russell 2000 did not.

[…] Separately, other markets remained mostly dormant on Tuesday. Treasuries barely moved, subduing current fears of rising interest rates for now. The Fed-sensitive 2-yr yield added one basis point to 2.86%, while the benchmark 10-yr yield declined one basis point to 3.16%. The U.S. Dollar Index traded near its flat line (94.77), and WTI crude settled 0.1% higher at $71.91/bbl with investors keeping an eye on U.S.-Saudi-Arabia tensions. The CBOE Volatility Index (VIX) fell 16.1% to 17.87, retreating from last week’s seven-month high.

[…] The key takeaway from the [Industrial Production] report is that it revealed the strongest year-over-year growth rate in industrial production (+5.1%) since December 2010.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month) Relative Strength (Current)
Consumer Discretionary Down (Below down trendline) XLY SPY
Consumer Staples Down (Below a down trendline) SPY XLP
Energy Side SPY XLE
Materials Down SPY SPY
Industrials Down XLI XLI
Finance Down SPY XLF
Technology Up (Under Pressure) XLK SPY
Utility Up-Side SPY XLU
Heath Care Up (under Pressure) XLV XLV
Real Estate Down SPY SPY
Telecom Down XTL SPY

 

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