Market Remarks

Morning Notes – Wednesday January 15, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways to a down day – watch for break above 3289.75 for change of fortune
  • Key economic data due:
    • PPI ( 0.1% vs. 0.2% est.; prev. 0.0%) at 8:30 AM
    • Core CPI (0.1% vs. 0.2% est.; prev. -0.2%) at 8:30 AM
    • Empire State Manufacturing Index (4.8 vs. 3.7 est.; prev. 3.5) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3277.19, 3268.43 and 3260.86
  • Critical resistance levels for S&P 500 are 3288.86, 3294.25 and 3301.92
  • Key levels for eMini futures: break above 3288.50, the high of 7:30 AM and break below 3278.25, the low of 10:00 PM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (March 2020) closed at 3283.25 and the index closed at 3283.13 – a spread of about +0.25 points; futures closed at 3288.00 for the day; the fair value is -4.75
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -6.25; Dow by -74 and NASDAQ by -10.00

Markets Around The World

  • Markets in the East closed mostly down – Sydney was up;
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
      GBP/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.785%, down from January 13 close of 1.848%;
    • 30-years is at 2.239%, down from 2.307%
    • 2-years yield is at 1.568%, down from 1.592%
    • The 10-Year-&-2-Year spread is at 0.217 down from 0.256
  • VIX
    • Is at 12.73 up 0.34 from January 14; above 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 small doji candle at all time high
    • %K is crossing below %D from above 90; potential Bearish Divergence
    • RSI-9 is turning down above 70; above 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 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-Side
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
  • Below 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to up since 11:15 PM
  • The Bollinger Band relatively stable
  • Stochastic (9, 1, 3): %K is crisscrossing %D;
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Tuesday, January 14 in higher volume. S&P 500, NASDAQ Composite, NYSE Composite and Wilshire 5000 Total Market Index closed down.

From Briefing.com:

[BRIEFING.COM] Each of the large-cap indices set new intraday highs on Tuesday, but only the Dow Jones Industrial Average (+0.1%) managed to finish higher. The S&P 500 and Nasdaq Composite both declined 0.2%, while the small-cap Russell 2000 rose 0.4%. […]

From a sector standpoint, the S&P 500 information technology (-0.6%) and real estate (-0.5%) sectors were today’s laggards, while the health care (+0.5%) and utilities (+0.3%) sectors finished with modest gains. Apple (AAPL 312.68, -4.28, -1.4%) weighed on the tech sector after shares were downgraded to Underweight from Neutral at Atlantic Equities.

[…]

U.S. Treasuries finished the quiet session on a mostly higher note. The 2-yr yield was unchanged at 1.58%, and the 10-yr yield declined three basis points to 1.82%. The U.S. Dollar Index finished flat at 97.38. WTI crude increased 0.3%, or $0.18, to $58.30/bbl.

[…]

• The Consumer Price Index for December brought good news in relative terms, as there weren’t any overshoots compared to expectations. Total CPI was up 0.2% m/m, as expected, while core CPI, which excludes food and energy, was up a softer-than-expected 0.1% (Briefing.com consensus +0.2%).
o The key takeaway from the report is that it won’t cause any immediate re-think of the Fed’s policy position. Core CPI has been up 2.3% yr/yr for three straight months, so the inflation rate isn’t running away from the Fed, which seems to have adopted a willingness to let inflation run above its longer-run goal for a bit before moving on rates; moreover, the CPI data takes a backseat to the PCE price data as the Fed’s preferred inflation gauge, and the latest report showed core-PCE inflation up just 1.6% yr/yr.
• The NFIB Small Business Optimism Index declined to 102.7 from 104.7.

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