Market Remarks

Morning Notes – Thursday January 16, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day – watch for break below 3294.50 for change of fortune
  • Key economic data due:
    • Retail Sales ( 0.3% vs. 0.3% est.; prev. 0.3%) at 8:30 AM
    • Core Retail Sales (0.7% vs. 0.5% est.; prev. 0.1%) at 8:30 AM
    • Philly Fed Manufacturing Index (17.0 vs. 3.7 est.; prev. 0.3) at 8:30 AM
    • Import Prices ( 0.3% vs. 0.3% est.; prev. 0.1%) at 8:30 AM
    • Unemployment Claims ( 204K vs. 217K est.; prev. 214K) at 8:30 AM
    • NAHB Housing Market Index ( est. 74 ; prev. 76) at 10:00 AM
    • Business Inventories ( est. -0.1%; prev. 0.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3298.66, 3280.69 and 3277.19
  • Critical resistance levels for S&P 500 are 3307.52, 3316.37 and 3332.72
  • Key levels for eMini futures: break above 3308.00, the high of 3:30 AM and break below 3294.50, the low of 8:30 PM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (March 2020) closed at 3291.00 and the index closed at 3289.29 – a spread of about +1.75 points; futures closed at 3293.75 for the day; the fair value is -2.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +10.00; Dow by +72 and NASDAQ by +34.50

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai was down;
  • European markets are mostly lower – Spain and Italy are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cocoa
    • Crude Oil
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.788%, down from January 14 close of 1.818%;
    • 30-years is at 2.242%, down from 2.275%
    • 2-years yield is at 1.548%, down from 1.568%
    • The 10-Year-&-2-Year spread is at 0.240 down from 0.250
  • VIX
    • Is at 12.15 down -0.27 from January 15; 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 small bullish engulfing candle with small lower shadow and a an upper shadow slightly larger than the real body
    • %K is crossing above %D above 90; potential Bearish Divergence
    • RSI-9 is turning up 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,; up swing since 8:00 PM on January 7
    • RSI-21 rose to above 70 from near 40 at 8:00 PM on January 14
    • %K has crossed below %D
  • A broadening pattern is emerging; price is near its upper bound
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Breaking above a sideways move; broke above an ascending triangle during Asian session in second attempt;  61.8% extension target near 3308 is achieved; the 100% extension target is near 3317.00
    • RSI-21 is near 60
    • %K is crisscrossing %D lower
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 9:00 AM on Wednesday
  • The Bollinger Band narrowed from 10:00 PM to 2:30 AM; expanded slightly after that till 7:30 AM and narrowing since
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower;
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Wednesday, January 15 in mixed volume. S&P 500 and NASDAQ Composite traded in higher volume. Only three S&P sectors – Consumer Discretionary, Energy and Finance closed down.

From Briefing.com:

The stock market set new highs in the moments leading up to signing of the Phase One trade deal on Wednesday, but a fade in momentum left the S&P 500 up just 0.2% for the session. The Dow Jones Industrial Average (+0.3%) closed at a record high, the Nasdaq Composite increased 0.1%, and Russell 2000 increased 0.4%.

[…]

The defensive-oriented S&P 500 utilities (+1.4%), health care (+0.9%), real estate (+0.8%), and consumer staples (+0.7%) sectors were today’s best-performing sectors. Conversely, the energy (-0.7%), financials (-0.6%), and consumer discretionary (-0.3%) sectors finished in the red.

[…]

U.S. Treasuries ended the session on a higher note as part of a defensive-oriented trade. The 2-yr yield and the 10-yr yield declined three basis points each to 1.55% and 1.79%, respectively. The U.S. Dollar Index declined 0.2% to 97.23. WTI crude declined 0.8%, or $0.44, to $57.86/bbl.

[…]

• The Producer Price Index for final demand increased 0.1% (Briefing.com consensus +0.2%) and so did the Producer Price index for final demand, excluding food and energy (Briefing.com consensus +0.2%). Those changes left the yr/yr increases at 1.3% and 1.1%, respectively, versus 1.1% and 1.3% in November.
o The key takeaway from the report is that it isn’t going to convince the Federal Reserve that it needs to raise its policy rate soon.
• The Mortgage Bankers Association reported a 30.2% surge in weekly mortgage applications, which included a 16% increase in purchase application volume.
• The Empire State Manufacturing Survey for January increased to 4.8 (Briefing.com consensus 2.8) from the prior month’s reading of 3.5.
• The Federal Reserve’s Beige Book for December noted that economic activity during the last six weeks of 2019 continued expanding at a modest pace.

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