Market Remarks

Morning Notes – Friday January 3, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; sharp decline at 8:30 PM; bouncing since 5:30 AM after falling nearly 60 points; up 20 points since
  • The odds are for a down day with elevated volatility – watch for break above 3240.00 for change of fortune
  • Key economic data due:
    • ISM Manufacturing PMI ( 49.0 est. ; prev. 48.1) at 10:00 AM
    • Construction Spending ( 0.4% est. ; prev. -0.8% ) at 10:00 AM
    • ISM Manufacturing Prices ( 47.7 est. ; prev. 46.7) at 10:00 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Confirmed Uptrend
  • 120-Min: Up-Side
  • 30-Min: Down-Side
  • 15-Min: Down
  • 6-Min: Down-Side

Key Levels:

  • Critical support levels for S&P 500 are 3231.72, 3212.03 and 3204.10
  • Critical resistance levels for S&P 500 are 3235.53, 3244.13 and 3258.14
  • Key levels for eMini futures: break above 3235.00, the high of 2:00 AM and break below 3206.75, the low of 5:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (March 2020) closed at 3258.50 and the index closed at 3257.85 – a spread of about +0.75 points; futures closed at 3259.00 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -30.00; Dow by -236 and NASDAQ up by -95.50

Markets Around The World

  • Markets in the East closed mostly lower – Sydney and Seoul were up; Tokyo was closed
  • European markets are mostly lower – Switzerland is up
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Copper
    • Cotton
    • Cocoa (Unch.)
  • Bonds
    • 10-yrs yield closed at 1.823%, down from December 31 close of 1.919%;
    • 30-years is at 2.283%, down from 2.389%
    • 2-years yield is at 1.573%, down from 1.577%
    • The 10-Year-&-2-Year spread is at 0.350 down from 0.342
  • VIX
    • Is at 14.66 up from January 2 close of 12.47; above 5-day SMA
    • Recent high was 15.39 on December 31; recent low was 11.72 on December 26

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

Monthly
  • Uptrend
  • December 2019 was a relatively large green candle with small upper shadow and a lower shadow half the size of the real body; fourth up month in a row and tenth in 2019
    • Stochastic %K is above %D and above 90
    • RSI-9 is breaking above a downtrend line from January 2018 high; above 70
    • Rising to the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 is broken in December since then a new high has been made
Weekly:
  • The week ending on December 27 was a green candle with small real body and smaller shadows
    • Continuing the break above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed above %D; above 90; potential bearish divergence
    • RSI (9) is above 80
  • Last week was up +18.80 or +0.6%; the 5-week ATR is 53.02
  • Last week’s pivot point=3236.15, R1=3251.80, R2=3263.57; S1=3224.38, S2=3208.73; R1 pivot level was breached
  • Fifth up week in last five weeks and ninth in last ten weeks
  • All time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • Above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A green candle with almost no upper shadow and small lower shadows; all time highs; breaking out
    • %K crossing above %D; just above 90; potential %D Bearish Divergence
    • RSI-9 is above 70 but below 8-day SMA
  • Broke above a symmetrical triangle, that resembles an ascending triangle, on October 25;
    • Upper bound 3027.98 and lower bound 2898.07; max height almost 130; break point is 3016.00; the 161.8% extension target near 3226.00 is achieved
  • Above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Declining since 6:00 PM on Thursday after making all time high of 3263.50; below the low of 8:00 AM on December 31, broke the sequence of higher highs and higher lows; trending higher since 10:00 AM on December 3 in steps
    • RSI-21 declined from above 75 to below 40 after making bearish divergence
    • %K crisscrossing %D near 30
  • Below 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Falling since 8:30 PM; declined nearly 60 points or nearly 2% from all time highs; bouncing since 5:30 AM
    • RSI-21 rising from below 30 at 5:30 AM
    • %K is above %D since 5:30 AM; above 70
    • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 10:30 PM on Thursday
  • The Bollinger Band is mostly expanded since 10:30 PM
  • Stochastic (9, 1, 3): %K is crossing below %D above 80
  • Bias: Down

Previous Session

Major U.S. indices closed mostly higher on Thursday, January 2, the first day of 2020, in higher volume. Russell 2000 closed down. Major indices except Russell 2000 and Dow Jones Transportation Average closed at all times highs.

From Briefing.com:

The large-cap indices climbed to new highs on this first trading day of 2020, as fresh stimulus out of China helped ignite a global equity rally. The Nasdaq Composite rose 1.3%, and the S&P 500 (+0.8%) and Dow Jones Industrial Average (+1.2%) followed suit. The Russell 2000 (-0.1%) finished lower.

China started the new year by announcing it will cut the reserve requirement ratio for small and large banks by 50 basis points on Jan. 6, providing about $115 billion in additional liquidity that can be lent out. China’s Shanghai Composite rose 1.2%, and Europe Stoxx 600 rose 0.9% amid a view that the stimulus action could have global ripple effects.

[…]

The advance in longer-dated U.S. Treasuries, which caused some curve-flattening activity, was another conflicting occurrence. The 2-yr yield was unchanged at 1.57%, and the 10-yr yield declined four basis points to 1.88%. The U.S. Dollar Index rose 0.4% to 96.81. WTI crude increased 0.1% (+0.05) to $61.15/bbl.

[…]

• Initial claims for the week ending December 28 decreased by 2,000 to 222,000 (Briefing.com consensus 225,000) while continuing claims for the week ending December 21 increased by 5,000 to 1.728 million.
o These headline results were not that intriguing, yet the key takeaway from the report — and what is intriguing — is that the four-week moving average for initial claims, which are a leading indicator, increased by 4,750 to 233,250. That is the highest four-week moving average since January 27, 2018.

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