Morning Notes – Wednesday January 18, 2017

/ January 18, 2017

Directional Bias For The Day:

  • The futures are almost unchanged
  • Drifting down after climbing to 2268.50 by midnight
  • Downtrend line since 12:00 AM on 15-minute timeframe
  • Odds are for a down day; watch for break above 2266.00 for change of fortunes

Markets Around The World

  • Markets in the East were mostly higher: only Sydney and Seoul were down;
  • European markets are mostly down: only DAX is higher
  • Dollar index and USD/JPY are up: GBP/USD and EUR/USD are down
  • Commodities are mostly down: only gold is up
  • 10-yrs yield closed at 2.327% down from Jan 13 close of 2.380%; 30-years closed at 2.9750% down from 2.977% on Jan 13

Key Levels:

  • Critical support levels for S&P 500 are 2262.81, 2254.25 and 2245.64
  • Critical resistance levels for S&P 500 are 2271.62, 2278.68 and 2282.10
  • Key levels for eMini futures: break above 2266.00, high at 5:30 AM and break below 2261.75, the low of 8:00 PM on January 17

Pre-Open

  • Pre-NYSE session open, futures price action is almost unchanged – at 7:30 AM, S&P 500 futures were up by +0.50, Dow is down by -10.00 and NASDAQ is up by +5.00
  • On Tuesday, at 4:00 PM, S&P future (March contract) closed at 2262.25 and the index closed at 2267.89 – a spread of about 5.75 points; futures closed at 2262.75 for the day; the fair value is -0.50

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

Monthly
  • Confirmed Uptrend
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2%
Weekly:
  • Candlestick for the last week was a narrow body with longer lower shadow than upper shadow; week before it was large green candle than open in the middle of previous large bearish engulfing and closed above the highs
  • Break of the high of week 2-Jan, 2282.10, is critical for the continuation of the uptrend
  • Broke above a down-sloping flag on November 14, 2016; first target is 2285.92; next 2363.14
  • Last swing low, 2083.79, was the low on November 4, 2016
  • Above 39-week SMA and 89-week SMA
Daily
  • Emerging broadening pattern since December 12
  • Friday’s narrow body with small upper and lower shadow followed a dragonfly candle on Thursday
  • Above 100-day, 200-day, 50-day and 20-day SMA
  • Sequence of higher highs and higher lows
  • Last swing low 2263.62
2-Hour (e-mini future)
  • Downward pressure; hugging the downtrend line from January 6 high; lower high, lower lows since 12:00 PM on Jan 6, the sequence was broken at 8:00 Am on Jan 13 with a higher high; waiting for a follow up higher low
  • Broke above a down-sloping flag at 10:00 AM on Jan 6; fell back into it at 8:00 Am on Jan 9;
  • Flag pattern is morphing in to a broadening pattern
  • Another down-sloping flag emerging within the broadening pattern
  • Broke the uptrend line from low at 2:00 PM on Dec 30
30-Minute (e-mini future)
  • Emerging triangles dissolved
  • Below a downtrend line from the high at 9:00 AM on Jan 13
  • Bouncing off 61.8% Fib retracement of the rise from Jan 12 low of 2248.50 to Jan 13 high of 2273.50
  • Below falling 50-bar EMA and 20-day EMA, which are acting as resistance since Jan 16

Previous Session

U.S. indices declined on Tuesday January 17, the first day after the MLK Holiday.

Dow Jones Industrial Average is near the lower limit of a narrow horizontal channel that it has been traversing since Dec 12. It is at the 20-day EMA. S&P 500, NYSE Composite and Wilshire 5000 Total Market index are moving to the center of an emerging broadening pattern. All three are above 20-day EMA.

Russell 2000 moved to the lower limit of a narrow horizontal trading range. It has broken below tits 20-day EMA. NASDAQ Composite is in danger of making an evening star pattern at all time high. A break below Tuesday’s low of 5527.22 will be critical. Next critical support is 5496.82, the low on January 12. Dow Jones Transportation Average is also in danger of making an evening star pattern. It is moving towards the broken downtrend line.

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