Morning Notes – Thursday November 29, 2018

/ November 29, 2018

Directional Bias For The Day:

  • S&P Futures are lower; drifting down since NYSE session lose on Wednesday
  • Odds are for a sideways to down day – watch for break above 2744.00 for change of fortune
  • Key economic data due:
    • Core PCE Price Index (0.1% vs. 0.2% est. and 0.2% prev.) at 8:30 AM
    • Personal Spending (0.6% vs. 0.4% est. and 0.2% prev.) at 8:30 AM
    • Personal Income (0.5% vs. 0.4% est. and 0.2% prev.) at 8:30 AM
    • Unemployment Claims (234K vs. 221K est. and 224K prev.) at 8:30 AM
    • FOMC Meeting Minutes at 2:00 PM

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Hong Kong closed down
  • European markets are mostly higher – Italy is lower
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • NatGas
    • Silver
    • Copper
    • Platinum (unch.)
    • Cotton
  • Bonds
    • 10-yrs yield is at 3.012%, down from November 28 close of 3.044%;
    • 30-years is at 3.298%, down from 2.329%
    • 2-years yield is at 2.790%, down from .814%
    • The 10-Year-&-2-Year spread is at 0.222, down from 0.230

Key Levels:

  • Critical support levels for S&P 500 are 2731.56, 2724.71 and 2717.67
  • Critical resistance levels for S&P 500 are 2744.00, 2746.80 and 2754.60
  • Key levels for eMini futures: break above 2738.75, the high of 11:30 PM and break below 2728.75, the low of 6:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (December contract) closed at 2744.50 and the index closed at 2743.79 – a spread of about +0.75 points; futures closed at 2741.50 for the day; the fair value is +3.00
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down by -5.25; Dow by -21; and NASDAQ by -25.50

Directional Bias Before Open

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

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 November 23 was a large red candle with a small lower shadow and almost no upper shadow
    • Stochastics (9,1, 3) and RSI (14) turning down – %K again crossed below %D from just below 50 and RSI also turned down from just below 50
    • During the week of October 22, Stochastics reached the lowest since the week of October 31, 2016 and RSI the lowest since the week on Jan 11, 2016
  • Last week was down by -44.74 or -1.6% and ATR is 105.24
  • Last week’s pivot point=2727.67, R1=284.59 R2=2832.91; S1=2679.35, S2=2622.43; S1/S2 pivot levels were breached;
  • A down week; second 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 gapped up at the open; gap was not filled; small lower shadow and almost no upper shadow; near the resistance created by the high on November 14
    • %K is above %D and above 90
    • Still lower highs and lower lows since October 3; need to break above 2746.75 to break the sequence; the break above the last lower high of 2816.94 on October 17 was missed by a whisker on November 7
  • Above 20-day EMA; below 50-day EMA, 100-day SMA, 200-day SMA
  • In Correction
2-Hour (e-mini future)
  • Drifting down since 4:00 PM on Wednesday near a resistance level of 2747.00
  • RSI-9 rising since 8:00 AM on November 20; declined to just above 65 from a high of 88.64
  • Above 20-bar EMA, which is above EMA10 of EMA50; both rising
  • Bias: Side-Up
30-Minute (e-mini future)
  • Rising since 8:30 AM on November 23;
  • Broke above a horizontal channel – high 2671.25 and low 2627.00 – the 161.8% extension target above 2742.00 has been achieved
  • RSI-9 mostly above 40 since November 23; occasional breaks above 65; drifting down from a high of November 28 and mad a bearish divergence at 3:30 PM
  • At/above 20-bar EMA , which is above EMA10 of EMA50; both flattening
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting sideways since 4:45 PM on Wednesday
  • The band is narrow since 9:45 PM
  • RSI-9 declined from above 87.38 to just above 50
  • Stochastic (9, 1, 3): %K crossed above %D at 8:00 AM from below 50
  • Bias: Up-Side

Previous Session

Major U.S. indices closed sharply higher on Wednesday November 28. The volume was mostly higher from previous day.  Russell 2000 traded in lower volume. Market gapped up at the open and most indices did not close the gap despite retracing part of the gap.

From Briefing.com:

The S&P 500 confidently extended weekly gains by 2.3% on Wednesday after Federal Reserve Chair Jerome Powell said he sees current interest rates “just below” neutral. That proved to be a rally point because the language Mr. Powell used early last month indicated a view that the fed funds rate was “a long way from neutral.”

Meanwhile, the Dow Jones Industrial Average gained 2.5%, the Nasdaq Composite gained 3.0%, and the Russell 2000 gained 2.5%.
Fed Chair Powell added that there is no preset policy path, and the Fed will be data-dependent in its decision making, which pleased investors. By highlighting risks, though, that included previous rate increases, trade disputes, and Brexit/EU political uncertainty, the market chose to read between the lines that the Fed chair isn’t wedded to three rate hikes in 2019.

Mr. Powell’s perceived dovish remarks sent bond yields and the dollar lower. The U.S. Dollar Index dropped 0.6% to 96.84, the 2-yr yield fell three basis points to 2.80%, and the 10-yr yield slipped one basis point to 3.04%.

[…]

Also, WTI crude dropped 2.7% to $50.20/bbl after crude stockpiles rose for the 10th consecutive week, according to the Energy Information Administration (EIA).

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

 

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