Market Remarks

Morning Notes – Tuesday January 14, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are little changed to lower;
  • The odds are for a sideways to an up day – watch for break below 3275.75 for change of fortune
  • Key economic data due:
    • CPI ( 0.2% vs. 0.2% est.; prev. 0.3%) at 8:30 AM
    • Core CPI (0.1% vs. 0.2% est.; prev. 0.2%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3280.01, 3268.43 and 3260.86
  • Critical resistance levels for S&P 500 are 3294.70, 3301.26 and 3314.40
  • Key levels for eMini futures: break above 3292.50, the high of 4:30 AM and break below 3275.25, the low of 3:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3288.50 and the index closed at 3288.13 – a spread of about +0.25 points; futures closed at 3289.75 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower to little changed – at 8:15 AM, S&P 500 futures were down by -3.75; Dow by -9 and NASDAQ by -9.00

Markets Around The World

  • Markets in the East closed mostly up – Shanghai and Hong Kong were down;
  • European markets are mostly down – U.K. and STOXX 600 are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Platinum
  • Bonds
    • 10-yrs yield closed at 1.848%, up from January 10 close of 1.825%;
    • 30-years is at 2.307%, up from 2.284%
    • 2-years yield is at 1.592%, up from 1.576%
    • The 10-Year-&-2-Year spread is at 0.256 up from 0.249
  • VIX
    • Is at 12.53 up from January 13 close of 12.32; 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 green candle with almost no upper and lower shadows that closed above Friday’s bearish engulfing candle
    • %K is crossing above %D above 90
    • RSI-9 is turning up above 70; above 8-day SMA;
  • Above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Moving sideways to up since 2:00 PM on January 9; essentially moving sideways to up since 4:00 PM on December 26, though showing signs of breaking out;
    • RSI-21 declined from above 90 at 6:00 PM, after making a bearish divergence, to near 50;
    • %K is crisscrossing %D lower
  • A broadening pattern is emerging; price is near its upper bound
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways since 3:00 PM on January 8;
    • RSI-21 is moving around 50 since 4:00 AM after declining from above t 65 to below 40
    • %K is below %D since 5:00 AM
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to down since 9:15 PM
  • The Bollinger Band narrowed from 9:15 PM to 2:45 AM; expanding since with price first walking down the lower band and then bouncing to the mid-band
  • Stochastic (9, 1, 3): %K is crisscrossing %D higher since 6:00 AM;
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Monday, January 13 in mostly higher volume. S&P 500 traded in lower volume. Major indices mostly recovered the losses suffered on Friday. Dow Jnes Industrial Average was an exception.

From Briefing.com:

The S&P 500 (+0.7%) and Nasdaq Composite (+1.0%) closed at record highs on Monday in a continuation trade of the market’s bullish momentum. The Dow Jones Industrial Average increased 0.3%, and the Russell 2000 increased 0.7%.

[…]

In turn, ten of the 11 S&P 500 sectors pushed higher, with leadership coming from the materials (+1.4%), information technology (+1.3%), and real estate (+1.2%) sectors. Apple (AAPL 316.96, +6.63, +2.1%) remained an influential force after its price target was raised to $375 from $300 at D.A. Davidson.

[…]

The health care sector (-0.4%) was the lone holdout amid disappointing guidance from Abiomed (ABMD 168.10, -20.96, -11.1%), weakness in the insurance stocks after Senator Bernie Sanders (I-VT) took the lead in the latest poll in Iowa, and a relatively quiet first day at the JPMorgan Healthcare Conference.

[…]

U.S. Treasuries finished slightly lower in a tight-ranged session. The 2-yr yield and the 10-yr yield increased two basis points each to 1.58% and 1.85%, respectively. The U.S. Dollar Index finished flat at 97.36. WTI crude fell 1.5%, or $0.87, to $58.12/bbl.

Monday’s economic data was limited to the Treasury Budget for December, which showed a deficit of $13.3 billion (Briefing.com consensus -$15.0 billion) versus a deficit of $13.5 billion in the same period a year ago. The budget deficit over the last 12 months is $1.022 trillion versus $1.022 trillion in November.

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