Market Remarks

Morning Notes – Monday January 13, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideways to an up day – watch for break below 3271.75 for change of fortune
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3260.86, 3251.95 and 3238.35
  • Critical resistance levels for S&P 500 are 3277.58, 3282.99 and 3291.86
  • Key levels for eMini futures: break above 3278.25, the high of 5:00 AM and break below 3271.25, the low of 7:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (March 2020) closed at 3265.75 and the index closed at 3265.35 – a spread of about +0.55 points; futures closed at 3264.75 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +11.50; Dow by +106 and NASDAQ by +41.50

Markets Around The World

  • Markets in the East closed mostly up – Sydney and Singapore were down; Tokyo was closed
  • European markets are mostly down – U.K. and France are higher
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Cotton
    • Gold
    • Silver
    • Platinum
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.841%, down from January 9 close of 1.858%;
    • 30-years is at 2.304%, down from 2.330%
    • 2-years yield is at 1.576%, down from 1.584%
    • The 10-Year-&-2-Year spread is at 0.265 down from 0.274
  • VIX
    • Is at 12.71 up from January 10 close of 12.56; below 5-day SMA
    • Recent high was 16.39 on January 6; 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 10 was a bullish engulfing candle with almost no lower shadow and small upper shadow
    • 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 +30.50 or +0.9%; the 5-week ATR is 51.06
  • Last week’s pivot point=3254.33, R1=3294.01, R2=3322.68; S1=3225.66, S2=3185.98; R1/R2 pivot levels were breached
  • An up week following the first down week in last five weeks and eight in last ten weeks
  • At 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 bearish engulfing candle with almost no upper shadow and small lower shadow; made all time intra-day high
    • %K is crossing below %D; potential %D Bearish Divergence
    • RSI-9 is turning down from above 70; 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 sideways since 2:00 PM on January 9; essentially moving sideways since 4:00 PM on December 26, though showing signs of breaking out;
    • RSI-21 rising since 4:00 PM on Friday from near 30 to above 50
    • %K is above %D near 80
  • A broadening pattern is emerging; price is near its upper bound
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving sideways since 3:00 PM on January 8;
    • RSI-21 is moving around 50 since 8:00 PM on Sunday
    • %K is above %D
  • At/above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving with an up bias since  8:15 PM on Sunday
  • The Bollinger Band was narrow from 00:45 AM to 3:30 AM; expanding lightly since
  • Stochastic (9, 1, 3): %K is above %D since 7:00 AM;
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Friday, January 10 in mixed volume. Dow Jnes Industrial Average and NASDAQ Composite traded in lower volume. Most major indices made bearish engulfing and are showing potential stochastic bearish divergence. continue to breakout from few day’s consolidation.

For the week, major indices advanced, except Russell 2000, in higher volume. Four S&P sectors – Energy, Materials, Industrials and Finance closed down for the week.

From Briefing.com:

The stock market hit new highs on Friday but succumbed to profit taking late in the session, as the December employment report failed to generate much excitement. The Dow Jones Industrial Average (-0.5%) hit 29,000 for the first time early in the session before finishing slightly lower with the S&P 500 (-0.3%), Nasdaq Composite (-0.5%), and Russell 2000 (-0.4%).

[…]

The S&P 500 financials (-0.8%), industrials (-0.7%), energy (-0.6%), and consumer discretionary (-0.5%) sectors were today’s laggards.
The defensive-oriented real estate (+1.0%), utilities (+0.2%), and health care (+0.04%) sector finished higher.

[…]

U.S. Treasuries ended the session on a higher note as part of a defensive-oriented trade. The 2-yr yield declined one basis point to 1.56%, and the 10-yr yield declined three basis points to 1.83%. The U.S. Dollar Index declined 0.1% to 97.36. WTI crude fell 0.9%, or $0.55, to $58.99/bbl.

[…]

• December nonfarm payrolls increased by 145,000 (Briefing.com consensus 160,000), private sector payrolls increased by 139,000 (Briefing.com consensus 157,000), the unemployment rate was 3.5% (Briefing.com consensus 3.5%), and average hourly earnings were up 0.1% (Briefing.com consensus +0.3%).
o The key takeaway from the report, which included updates to the seasonal adjustment factors for the labor force series derived from the household survey, was that average hourly earnings and the average workweek were both weaker than expected. That may temper any inflation concerns, but at the same time it is apt to temper consumer spending activity and overall GDP growth expectations for the fourth quarter.
• Wholesale inventories decreased 0.1% m/m in November (Briefing.com consensus +0.2%) after increasing 0.1% in October. Wholesale sales surged 1.5% after declining 0.9% in October.
o The key takeaway from the report is that sales activity was strong in November, but it will still prove difficult for wholesalers to gain pricing power given that inventory growth remains well ahead of sales growth on a yr/yr basis.

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