Morning Notes – Monday October 29, 2018

/ October 29, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 2:30 AM
  • Odds are for an up and choppy day; elevated volatility
  • Key economic data due:
    • Core PCE Price Index (0.2% vs. 0.1% est.) at 8:30 AM
    • Personal Spending (0.4% vs. 0,.4% est.) at 8:30 AM
    • Personal Income (0.2% vs. 0.4% est.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mixed – Hong Kong, Sydney, Mumbai and Singapore closed up; Hong Kong was closed; Shanghai, Tokyo and Seoul Closed down;
  • European markets are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
  • Commodities:
    Up Down
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Crude Oil
    • NatGas
    • Gold
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.094%, up from October 26 close of 3.077%;
    • 30-years is at 3.322%, up from 3.317%
    • 2-years yield is at 2.835%, up from 2.811%
    • The 10-Year-&-2-Year spread is at 0.259, down from 0.266

Key Levels:

  • Critical support levels for S&P 500 are 2641.82, 2628.16 and 2615.32
  • Critical resistance levels for S&P 500 are 2692.38, 2700.92 and 2722.70
  • Key levels for eMini futures: break above 2700.75, the high of 7:00 AM and break below 2689.50, the low of 7:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (December contract) closed at 2657.25 and the index closed at 2658.69 – a spread of about -1.50 points; futures closed at 2669.50 for the day; the fair value is -12.25
  • Pre-NYSE session open, futures price action is to the upside – at 9:15 AM, S&P 500 futures were up +25.75; Dow by +130; and NASDAQ by +76.50

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correct
  • 120-Min: Down-Side
  • 30-Min: Side-Up
  • 15-Min: Side-Up
  • 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 26 was a large red candle, following a doji with small lower shadow and longer upper shadow; broke below lows since the week of May 7, 2018
    • Stochastics (9,1, 3) and RSI (14) continue to decline following their bearish divergences at the last high
    • Stochastics at the lowest since the week of October 31, 2016 and RSI at the lowest since the week on Jan 11, 2016
  • Last week’s pivot point=2688.60, R1=2749.03 R2=2839.38; S1=2598.25, S2=2537.82; S1/S2/S3 pivot levels were breached;
  • First down week in a row; fourth 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; 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; above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A spinning top red candle with almost equal sized upper and lower shadow, which were near eight times the size of the real body; indicating indecision and a break beyond any extremes will be revelatory
    • %K made a bullish divergence on October 23, 2018; another potential higher %K at a lower level
    • Below a down trend line since the high on October 3
    • Lower highs and lower lows since then
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Below a down trend line; lower highs and lower lows; below EMA 50
  • RSI-9 making bullish divergences since October 24, ; twice bullish divergences – at 2:00 PM on October 24 and at 8:00 AM on October 26; potential for a bounce
  • Below/at EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down-Side
30-Minute (e-mini future)
  • Breaking above a symmetrical triangle near the lows;
  • RSI-9 rising since 10:30 AM on October 26 after making a low of 29.19; above 65
  • Above 20-bar EMA, which is above 20-bar EMA; both rising after staying flat for some time
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 5:15 AM after mostly moving sideways since 10:30 PM on October 25
  • The band was narrowing from 10:30 PM; expanding since 5:15 AM with price moving along the upper band
  • RSI-9 rising since 2:15 AM low of 38.42; above 65
  • The Stochastic (9, 1, 3): %K is crisscrossing %D down from above 90
  • Bias: Side-Up

Previous Session

Major U.S. indices closed sharply lower on Friday October 26. The volume was mostly higher from Thursday. Dow Jones Transportation Average traded in lower volume.

The indices gapped down at the open then turned up after one hour of trading and closed the gap. They declined later in the day and closed near the open. All S&P Sectors were down.

For the week, indices closed down in higher volume. Indices lost more that 3% for the week.  Indices are showing signs of break down. All S&P sectors were down for the week.

From Briefing.com:

The stock market just had another terrible, horrible, no good, very bad week, filling in some more blanks on what has been a terrible, horrible, no good, very bad month.

Just how bad has it been? The Russell 2000 is down 12.5% in October; the Nasdaq Composite is down 10.9%; the S&P 500 is down 8.8%; and the Dow Jones Industrial Average is down 6.7%.

[…]The worry isn’t about the growth that was just left behind. Rather, it is about the growth to come — or perhaps lack thereof.

There are various explanations regarding the causes of the stock market’s correction: the adverse effect of a strong dollar; the slowdown in China and other foreign markets; tariff issues, raw material price increases; political uncertainty; diplomatic uncertainty; price increases for consumers; rising interest rates; and profit margin pressures.

[…]The clearest evidence that the stock market is wrapped up in worries that future earnings growth won’t live up to expectations is in the third quarter earnings results.

[…]There was nowhere to hide other than in cash and risk-free Treasuries. Yields fell across the curve. The 2-yr note came down 11 basis points to 2.81% and the 10-yr yield dropped 12 basis points to 3.08%.

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

 

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