Market Remarks

Morning Notes – Thursday January 9, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; bounced up following the drop during the last half-hour of trading on Wednesday; up 18 point from that low; moving sideways since 2:30 AM
  • The odds are for an up day – watch for break below 3257.75 for change of fortune
  • Key economic data due:
    • Unemployment Claims (214K vs.221K est.; prev. 223K ) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3251.95, 3238.35 and 3232.58
  • Critical resistance levels for S&P 500 are 3267.07, 3282.66 and 3298.26
  • Key levels for eMini futures: break above 3274.00, the high of 3:30 AM and break below 3257.75, the low of 10:00 PM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (March 2020) closed at 3253.75 and the index closed at 3253.05 – a spread of about +0.75 points; futures closed at 3260.25 for the day; the fair value is -6.50
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +10.00; Dow by +90 and NASDAQ by +48.50

Markets Around The World

  • Markets in the East closed higher
  • European markets are mostly up – Spain is down
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CAD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Copper
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.874%, up from January 7 close of 1.827%;
    • 30-years is at 2.358%, up from 2.305%
    • 2-years yield is at 1.581%, up from 1.544%
    • The 10-Year-&-2-Year spread is at 0.293 up from 0.283
  • VIX
    • Is at 13.13 down from January 8 close of 13.45; below 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 green candle with almost no lower shadow and upper shadow almost equal to the real body
    • %K is crossing above %D from near 50; potential %D Bearish Divergence
    • RSI-9 is turning up above 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)
  • Moving up since 8:00 PM on January 7 after a sharp sudden decline; essentially moving sideways since 4:00 PM on December 26, though showing signs of breaking out;
    • RSI-21 is flattening just near 70
    • %K is crisscrossing %D near 75
  • A broadening pattern is emerging; price near its upper bound
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving up since 7:30 PM on January 7 after a sudden sharp decline of nearly 50 points
    • RSI-21 is moving around 60 since 11:00 AM on January 8;
    • %K is crossing above %D near 20 after declining from above 90 at 2:30 AM
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is trending up since 2:00 AM on Wednesday
  • The Bollinger Band is narrowing since 7:00 AM
  • Stochastic (9, 1, 3): %K is crossing above %D near 30 at 8:00 AM
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Wednesday, January 8 in higher volume. Major indices made breakout candle patterns. Most major indices except Dow Jones Transportation Average and Russell 2000 made all time highs. On two S&P sectors – Energy and Utility – closed down.

From Briefing.com:

The S&P 500 (+0.5%) set a new intraday high on Wednesday, as investors were relieved to hear that the situation in Iran may not escalate militarily beyond the actions taken by Iran last night. The Nasdaq Composite (+0.7%) closed at a record high, the Dow Jones Industrial Average gained 0.6%, and the Russell 2000 gained 0.3%. Stocks did fade into the close, though.

[…]

The information technology (+1.0%) and communication services (+0.7%) sectors outperformed, while the energy sector (-1.7%) fell behind amid a retreat in oil prices ($59.62, -3.06, -4.9%). WTI crude futures dropped below $60/bbl following bearish inventory data and receding concerns about production disruptions.

[…]

U.S. Treasuries declined alongside the advance in equities, driving yields higher across the curve. The 2-yr yield rose four basis points to 1.58%, and the 10-yr yield rose five basis points to 1.87%. The U.S. Dollar Index increased 0.3% to 97.30. Gold futures fell 0.9% to $1560.50/ozt.

[…]

• The ADP Employment Change Report showed an estimated 202,000 positions were added to private sector payrolls in December (Briefing.com consensus 155,000) on top of an upwardly revised 124,000 (from 67,000) in November.
• Consumer credit increased by $12.5 bln in November (Briefing.com consensus $17.5 bln) after increasing by $18.9 bln in October.
o The key takeaway from the report is that the November increase was driven entirely by nonrevolving credit.

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