Morning Notes – Friday November 2, 2018

/ November 2, 2018

Directional Bias For The Day:

  • S&P Futures are higher; moving lower since 7:45 after breaking above 2:15 AM high of 2764.00 by a tick; broken below the intermediate low of 2753.75
  • Potential double top pattern on 15-minute chart; 61.8% extension target is near 2747.50 and the 100% extension target is near 2743.50
  • Odds are for an up day with good chance of sideways move from current, pre-open, levels and with choppiness and elevated volatility – watch for break below 2747.50 for change of fortune
  • Key economic data due:
    • Non-Farm Employment Change (250K vs. 194K est. and 134K prev.) at 8:30 AM
    • Unemployment Rate ( 3.7% vs. 3.7% est. and 3.7% prev.) at 8:30 AM
    • Average Hourly Earnings (0.2% vs. 0.2% est. and 0.3% prev. ) at 8:30 AM
    • Trade Balance (-54.0B vs. -53.5B est. and -53.2B prev. ) at 8:30 AM

Markets Around The World

  • Markets in the East closed up
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.157%, up from November 1 close of 3.144%;
    • 30-years is at 3.389%, up from 3.387%
    • 2-years yield is at 2.875%, down from 2.793%
    • The 10-Year-&-2-Year spread is at 0.290, down from 0.301

Key Levels:

  • Critical support levels for S&P 500 are 2741.67, 2726.44 and 2708.85
  • Critical resistance levels for S&P 500 are 2753.59, 2766.48 and 2778.94
  • Key levels for eMini futures: break above 2765.75, the high of 7:30 AM and break below 2753.75, the low of 6:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (December contract) closed at 2738.75 and the index closed at 2740.37 – a spread of about +1.75 points; futures closed at 2738.00 for the day; the fair value is +0.75
  • Pre-NYSE session open, futures price action is to the upside – at 8:15 AM, S&P 500 futures were up +18.75; Dow by +231; and NASDAQ down by -10.00

Directional Bias Before Open

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Side-Up
  • 30-Min: Up
  • 15-Min: Up
  • 6-Min: Side

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

Monthly
  • Under Pressure
  • October 2018 closed sharply lower; broke below previous four months’ lows; only third down month since October 2016
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2% – continues; higher highs and higher lows
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 large green candle that opened above previous day’s shooting-star like candle’s close and closed above its high, a bullish sign
    • %K is above %D after making 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 October 3
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Broken above the downtrend line from the high on October 3; broken the sequence of lower highs and lower lows; broken above EMA 50
  • RSI-9 above 70 after declining to near 60 n November 1 from above 75; made 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: Side-Up
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 on November 1 to mostly above 65 since 00:30 AM
  • 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 mostly moving up since 9:45 PM on October 29
  • The band expanded from 00:30 AM to 5:45 AM; contracting since
  • RSI-9 mostly above 40 since 0:15 AM on October 30 with few forays below it; near 65
  • The Stochastic (9, 1, 3): %K crossed above %D at 5:45 AM; below 20
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Thursday November 1. The volume was lower from previous day. The indices gapped up at the open and stayed higher and also broke above previous day’s high, which is bullish. All S&P Sectors closed higher except for the Utility, which declined by -0.4%.

 

From Briefing.com:

The S&P 500 added 1.1% for a third straight day of gains on Thursday

[…]

The Dow Jones Industrial Average gained 1.1%, the Nasdaq Composite gained 1.8%, and the Russell 2000 outperformed with a gain of 2.2%.

[…]

Separately, U.S. Treasuries ticked higher on Thursday, pushing the 2-yr yield down four basis points to 2.84% and the 10-yr yield down two basis points to 3.14%. The slight flattening of the yield curve kept gains in check for the rate-sensitive financials sector (+0.5%), as lenders depend on the difference between what they pay for deposits and what they earn on loans.

Overseas, the Bank of England unanimously voted to leave rates unchanged at 0.75% as expected on Thursday. Additionally, the central bank lowered its growth forecasts for 2018 and 2019 by 0.1% in each year to 1.3% and 1.7%, respectively.

In Asia, major indices finished mostly higher, with Hong Kong’s Hang Seng outperforming with a gain of 1.8%. China’s Shanghai Composite ticked 0.1% higher.

[…]

The key takeaway from the report [ ISM Manufacturing Index ] is that the pullback is most likely a natural slowing of activity following what has been an impressive acceleration in manufacturing activity on a national level.

[…]

The key takeaway from the report [Productivity is that productivity is picking up. The third quarter increase was double the prior 10-quarter average increase of 1.1%. Faster productivity is a springboard for a better standard of living.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – October) Relative Strength (Current) %K vs. %D
Consumer Discretionary Down SPY SPY Below
Consumer Staples Under Pressure XLP XLP Above
Energy Down SPY SPY Below
Materials Down XLB XLB Cross – Over
Industrials Down SPY SPY Below
Finance Down XLF XLF Cross – Over
Technology Down SPY SPY Below
Utility Under Pressure XLU XLU Above
Heath Care Under Pressure SPY XLV Below
Real Estate Down (Turning Up) XLRE XLRE Below
Telecom Down SPY SPY Below

 

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