Market Remarks

Morning Notes – Tuesday January 7, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; price is arching own on 30-minute charts
  • The odds are for a down day with elevated volatility – watch for break above 3247.25 for change of fortune
  • Key economic data due:
    • Trade Balance ( -43.1B vs. -44.5B est. ; prev. -46.9B ) at 8:30 AM
    • ISM Non-Manufacturing PMI ( 54.5 est. ; prev. 53.9) at 10:00 AM
    • Factory Orders ( -0.6% est.; prev. 0.3%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3222.34, 3212.03 and 3204.10
  • Critical resistance levels for S&P 500 are 3234.54, 3246.15 and 3257.54
  • Key levels for eMini futures: break above 3247.25, the high of 7:30 AM and break below 3235.75, the low of 2:00 PM on Monday

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3246.50 and the index closed at 3246.28 – a spread of about +0.25 points; futures closed at 3243.50 for the day; the fair value is +3.00
  • Pre-NYSE session open, futures are mixed – at 9:00 AM, S&P 500 futures were down by -4.00; Dow down by -33 and NASDAQ up by +12.50

Markets Around The World

  • Markets in the East closed higher
  • European markets are mostly up – Spain is down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Cocoa
    • Crude Oil
    • Copper
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.809%, up from January 3 close of 1.788%;
    • 30-years is at 2.292%, up from 2.249%
    • 2-years yield is at 1.536%, up from 1.533%
    • The 10-Year-&-2-Year spread is at 0.273 up from 0.255
  • VIX
    • Is at 14.09 up from January 6 close of 13.85; above 5-day SMA
    • Recent high was 17.99 on December 3; 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 January 3 was a doji candle
    • 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 down -5.17 or -0.2%; the 5-week ATR is 53.45
  • Last week’s pivot point=3235.01, R1=3257.98, R2=3281.12; S1=3211.87, S2=3188.90; R1/S1 pivot levels were breached
  • First down week in last five weeks and second in last ten weeks
  • Near 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 relatively large green candle that gapped down at the open;
    • %K at %D from near 50; potential %D Bearish Divergence
    • RSI-9 is turning up near 60; below 8-day SMA; potential bearish divergence
  • Above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Mostly moving sideways since 4:00 Pm on December 26 between 3260.00 and 3210.00; trending higher since 10:00 AM on December 3 in steps
    • RSI-21 is near 50
    • %K is below %D lower
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Arching down since 2:00 PM on Monday near a resistance zone
    • RSI-21 declining from above 60 to below 50
    • %K is crisscrossing %D lower
    • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is arching down since 6:15 PM on Monday
  • The Bollinger Band is relatively stable sized since NYSE close on Monday
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Monday, January 6 in mostly lower volume. Dow Jones Transportation Average closed lower and Dow Jones Industrial Average traded in higher volume. Most major indices gapped down at the open but then closed above the opens and made bullish engulfing candles.

From Briefing.com:

The S&P 500 declined as much as 0.6% shortly after Monday’s open as tensions escalated in the Middle East, but a rebound led by mega-cap technology stocks helped the benchmark index close at session highs with a 0.4% gain. The Dow Jones Industrial Average gained 0.2%, the Nasdaq Composite gained 0.6%, and the Russell 2000 gained 0.1%.

[…]

The S&P 500 communication services sector (+1.2%) was today’s sector leader, largely due to the 2.5% gain in shares of Alphabet (GOOG 1394.21, +33.55) after the stock was upgraded to Buy from Hold at Pivotal Research Group.

[…]

U.S. Treasuries finished the session on a lower note, as investors bought the dip in equities. The 2-yr yield increased three basis points to 1.54%, and the 10-yr yield increased two basis points to 1.81%. The U.S. Dollar Index declined 0.2% to 96.66.

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