Market Remarks

Morning Notes – Monday December 3, 2018

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; drifting down since 3:30 AM and lower by 15 points from the high of 2814.00;
  • Odds are for an up day with high probability of moving sideways from the pre-open session – watch for break above 2801.00 and break below 2793.00 for clarity
  • Key economic data due:
    • ISM Manufacturing PMI (est. 57.5; 57.7 prev.) at 10:00 AM

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/INR
    • Dollar index
    • GBP/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • NatGas
    • Sugar
    • Cocoa
  • Bonds
    • 10-yrs yield is at 3.037%, up from November 30 close of 3.013%;
    • 30-years is at 3.325%, up from 3.311%
    • 2-years yield is at 2.827%, up from 2.786%
    • The 10-Year-&-2-Year spread is at 0.206, down from 0.227

Key Levels:

  • Critical support levels for S&P 500 are 2790.17, 2775.99 and 2764.24
  • Critical resistance levels for S&P 500 are 2806.79, 2814.75 and 283144
  • Key levels for eMini futures: break above 2801.75, the high of 8:00 AM and break below 2793.00, the low of 6:00 PM on Sunday

Pre-Open

  • On Friday, at 4:00 PM, S&P future (December contract) closed at 2756.50 and the index closed at 2760.17 – a spread of about -3.75 points; futures closed at 2758.25 for the day; the fair value is -1.75
  • Pre-NYSE session open, futures price action is to the upside – at 8:45 AM, S&P 500 futures were up by +39.25; Dow by +432; and NASDAQ by +142.00

Directional Bias Before Open

  • Weekly: Uptrend Under Pressure
  • Daily: In Correction
  • 120-Min: 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; November was a harami spinning top near the lower end of October
  • 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 30 was a large green candle with almost no upper and lower shadows; gapped up on Monday and the gap was not filled; closed above previous weeks high
    • Stochastics (9,1, 3) and RSI (14) turning up – %K crossed above %D from just below 10; RSI also turned up from just below 40
    • 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 up by +127.61 or +4.8% and ATR is 110.91
  • Last week’s pivot point=2723.67, R1=2797.38 R2=2834.58; S1=2686.47, S2=2612.76; R1 pivot level was breached;
  • An up week; third in last five weeks and fourth 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 green candle with small lower and smaller upper shadows; broke above the high of Thursday’s doji candle – a short term bullish sign
    • %K is above %D and above 80 and turned up
    • broke above the last high of 2746.75 but then closed below it;
  • Above 20-day EMA and 50-day EMA; below 100-day SMA, 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Futures gapped up on Sunday; drifting sideways to lower since then; between 2814.00 and 2793.00, the top of the gap
  • RSI-9 declining since 2:00 AM from 92.09
  • Above 20-bar EMA, which is above EMA10 of EMA50;
  • Bias: Up
30-Minute (e-mini future)
  • Similar to that on 2-hour chart but with down bias more pronounced
  • RSI-9 trending down since 6:00 PM on Sunday and made a bearish divergence at 2:30 AM, unlike that on 2-hour charts
  • At/above 20-bar EMA , which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly drifting sideways since 6:00 PM
  • The band was narrow from 10:45 PM to 5:30 AM; expanding slightly since then with price moving along the lower band
  • RSI-9 declining since 2:45 PM on Thursday
  • Stochastic (9, 1, 3): %K crisscrossing %D around 20; above %D since 7:00 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Friday November 30. Major indices broke above the high of previous day’s doji candle, a bullish sign. The volume was mostly higher. NASDAQ Composite traded in lower volume.

For the week, major indices closed higher in mostly higher volume. NASDAQ Composite traded in lower volume from previous week. Stocks closed higher in Asia and Europe too. Sydney exchange was down.

From Briefing.com:

The S&P 500 rallied 4.9% this week, helped by the Fed softening its policy stance and by hope that U.S-China trade tensions would be meaningfully eased at the G-20 Leaders Summit. For the month, the benchmark index rose 1.8%.

Meanwhile, the Dow Jones Industrial Average gained 5.2%, the Nasdaq Composite gained 5.6%, and the Russell 2000 gained 3.0%. For the month, the respective indices gained 1.7%, 0.3%, and 1.5%.

[…]

On a related note, the FOMC’s minutes from its November 7-8 meeting, which were released on Thursday, did nothing to upset the notion that the Fed will be hiking rates next month; the CME FedWatch Tool puts the chances at 82.7%.

[…]

This week, all S&P sectors finished higher with the consumer discretionary (+6.4%), information technology (+6.1%), health care (+5.9%), and communication services (+5.5%) sectors outperforming.

[…]

The SPDR Retail ETF (XRT) rose 5.1% this week, and Amazon (AMZN) climbed 12.5%.

Conversely, the defensive-oriented real estate (+2.7%), consumer staples (+2.9%), and utility (+2.7%) sectors underperformed the broader market, though still finished with respectable gains.

[…]

Looking at other markets, the Treasury yield curve saw some flattening with the 2-yr yield losing one basis point to 2.81%, and the 10-yr yield losing four basis points to 3.01%. The U.S. Dollar Index increased by 0.3% to 97.20, and WTI crude added 0.1% to $50.67/bbl, though lost over 20.0% this month.

Overseas, equity indices in the Asia-Pacific region closed the week on a modestly positive note with Japan’s Nikkei (+3.3%) showing relative strength. In Europe, the major indices closed the week slightly higher with Italy’s MIB (+2.5%) showing relative strength.
Index Started Week Ended Week Change % Change YTD %

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – November) 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 Above
Industrials Down XLI (Cross – Over) XLI Below
Finance Down XLF XLF Above
Technology Down SPY SPY Below
Utility Under Pressure XLU XLU Above
Heath Care Under Pressure XLV (Cross – Over) XLV Above
Real Estate Up XLRE XLRE Above
Telecom Down SPY SPY Below

 

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