Morning Notes – Thursday November 1, 2018

/ November 1, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving lower since 7:30 AM; mostly moving up in an up-sloping channel since 3:45 PM on October 31
  • Odds are for an up to sideways day with choppiness and elevated volatility – watch for break above 2727.25 and break below 2707.25 for more clarity
  • Key economic data due:
    • Prelim Nonfarm Productivity (2.2% vs. 2.2% est. and 2.9% prev.) at 8:30 AM
    • Prelim Labor Cost (1.2% vs. 1.1% est. and -1.0% prev.) at 8:30 AM
    • Unemployment Claims (214K vs. 213K est. and 216K prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Singapore closed up; Tokyo, Mumbai and Seoul closed down
  • European markets are mostly higher – U.K and France are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Crude Oil
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.163%, up from October 31 close of 3.159%;
    • 30-years is at 3.414%, up from 3.402%
    • 2-years yield is at 2.875%, down from 2.793%
    • The 10-Year-&-2-Year spread is at 0.288, up from 0.280

Key Levels:

  • Critical support levels for S&P 500 are 2705.60, 2685.43 and 2672.45
  • Critical resistance levels for S&P 500 are 2729.38, 2736.69 and 2753.59
  • Key levels for eMini futures: break above 2727.25, the high of 6:30 AM and break below 2707.25, the low of 3:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (December contract) closed at 2711.50 and the index closed at 2711.74 – a spread of about -0.25 points; futures closed at 2711.00 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up +4.00; Dow by +73; and NASDAQ by +6.00

Directional Bias Before Open

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

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 small real bodied green candle with a very long upper shadow and no lower shadow that almost looks like s hooting star; a break above or below the day’s high or low will be critical for next few day’s direction
    • %K made a bullish divergence on October 23, 2018 and another on October 29
    • Gapped above the a down trendline 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 from high but breaking above some shallower down trendlines; approaching a high and a move above 2707.00 will break the sequence of lower highs and lower lows; broken above EMA 50
  • RSI-9 declined to near 60 from above 75 after making three bullish divergences since October 24 – at 2:00 PM on October 24, at 8:00 AM on October 26, and at 2:00 Pm on October 29;
  • Above 20-bar EMA, which is at EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Above an uptrend line from the low of 2603.00 at3:30 PM on October 29; a retracement from the high on October 31 stopped near the 50-bar EMA; sequence of higher highs and higher lows since 3:30 PM on October 29
  • RSI-9 rising from near 40 at 2;00 AM; between 40 and 65 since 3:00 PM on October 31
  • Above 20-bar EMA, which is above 20-bar EMA; both rising
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 9:30 PM
  • The band was narrow from 9:30 PM to 4:45 AM and is expanding since
  • RSI-9 mostly above 40 since :15 AM on October 30 with few forays below it; near 65
  • The Stochastic (9, 1, 3): %K crossed below %D at 6:45 AM; below 20
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday October 31. The volume was mixed. Dow Jones Transportation Average and Russell 2000 traded in higher volume from Tuesday and others in lower volume. The indices gapped up at the open and the moved higher. The indices gave up a lot of day’s gain near the close, however, most did not fill the gap. Only three S&P Sectors – Consumer Staples, Utilities and Real Estate – were down.

From Briefing.com:

The S&P 500 advanced 1.1% on Wednesday, securing a second straight day of gains to end a bruising October with a monthly loss of 6.9%.

[…]

The tech-sensitive Nasdaq Composite surged 2.0%, reducing its monthly loss to 9.2%, while the Dow Jones Industrial Average gained 1.0% to reduce its monthly loss to 5.1%. Small caps underperformed, with the Russell 2000 adding 0.3% to bring its monthly loss to 10.9%.

[…]

Also, the rate-sensitive and heavily-weighted financials sector outperformed the broader market with a gain of 1.4%.

[…]

Conversely, underperforming sectors on Wednesday included the defensive-oriented consumer staples (-0.9%), utilities (-1.2%), and real estate (-1.4%) groups.

[…]

Separately, WTI crude extended its recent decline, losing 1.3% to $65.31/bbl, reaching its lowest level since August.

[…]

International equity markets finished Wednesday on a higher note. In Asia, Japan’s Nikkei gained 2.1% after the Bank of Japan made no changes to its policy stance, and China’s Shanghai Composite added 1.4% to notch its second consecutive gain. Meanwhile, the Euro STOXX 50 tallied a 1.6% gain with France’s CAC (+2.3%) leading the advance.

[…]

The key takeaway from the report [employment cost index ] is that it corroborates a trend of rising compensation costs for civilian workers that have been discussed by employers and which have kept the Federal Reserve on a tightening path.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month) Relative Strength (Current) %K vs. %D
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 SPY
Real Estate Down (Turning Up) SPY XLRE
Telecom Down XTL SPY

 

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