Market Remarks

Morning Notes – Friday January 17, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day – watch for break below 3317.50 for change of fortune
  • Key economic data due:
    • Building Permits ( 1.42M vs. 1.47M est.; prev. 1.47M) at 8:30 AM
    • Housing Starts (1.61M vas. 1.38M est.; prev. 1.38M) at 8:30 AM
    • Capacity Utilization (77.0% vs. 77.0% est.; prev. 77.3%) at 9:15 AM
    • Industrial Production ( -0.3% vs. 0.0% est.; prev. 1.1%) at 9:15 AM
    • Prelim UoM Consumer Sentiment ( est. 99.3; prev. 99.3 ) at 10:00 AM
    • JOLTS Job Openings ( est. 7.24M ; prev. 7.27M) at 10:00 AM
    • Prelim UoM Inflation Expectations ( prev. 2.3%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3309.97, 3302.97 and 3398.66
  • Critical resistance levels for S&P 500 are 3321.67, 3326.54 and 3335.96
  • Key levels for eMini futures: break above 3328.50, the high of 8:30 AM and break below 3317.50, the low of 0:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (March 2020) closed at 3317.50 and the index closed at 3316.81 – a spread of about +0.75 points; futures closed at 3316.50 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +9.75; Dow by +7 and NASDAQ by +43.00

Markets Around The World

  • Markets in the East closed up;
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
    • NatGas
    • Coffee
  • Bonds
    • 10-yrs yield closed at 1.843%, up from January 15 close of 1.788%;
    • 30-years is at 2.304%, up from 2.242%
    • 2-years yield is at 1.580%, up from 1.548%
    • The 10-Year-&-2-Year spread is at 0.263 up from 0.240
  • 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 green candle with almost no upper and lower shadows that gapped up at the open
    • %K is above %D above 90;
    • 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 up since 8:00 PM on January 7; breaking above a broadening pattern
    • RSI-21 rose to above 80 from near 40 at 8:00 PM on January 14
    • %K is crisscrossing %D around 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Broke above an ascending triangle during Asian session on Thursday; the 100% extension target near 3317.00 is achieved; 161.8% extension target is near 3330.00
    • RSI-21 is moving above 60
    • %K is above %D near 50
  • 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 2:30 AM
  • The Bollinger Band was narrow from 9:30 PM to 2:30 AM; expanded after that till 8:00 AM
  • Stochastic (9, 1, 3): %K has crossed below %D;
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Thursday, January 16 in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume. All S&P sectors closed up.

From Briefing.com:

The S&P 500 rose 0.8% on Thursday in a broad-based advance that carried the benchmark index past the 3300 level for the first time. The Dow Jones Industrial Average (+0.9%) and Nasdaq Composite (+1.1%) also closed at record highs, while the Russell 2000 outperformed with a 1.4% gain.

[…]

All 11 S&P 500 sectors started and finished in the green, with the broader market rallying into the close. The information technology sector (+1.4%) provided the leadership amid strength in its top-weighted components and the semiconductor stocks, which got a boost from the positive earnings results from Taiwan Semiconductor (TSM 58.75, +0.36, +0.6%).

[…]

U.S. Treasuries finished on a lower note amid the risk-on mindset in equities. The 2-yr yield increased two basis points to 1.57%, and the 10-yr yield increased two basis points to 1.81%. The U.S. Dollar Index increased 0.1% to 97.30. WTI crude rose 1.1%, or $0.62, to $58.48/bbl.

[…]

• Retail sales increased 0.3% m/m in December following an upwardly revised 0.3% increase (from 0.2%) in November. Retail sales, excluding autos, jumped 0.7% (Briefing.com consensus +0.5%) after a downwardly revised unchanged reading (from 0.1%) in November.
o The key takeaway from the report is that the December sales increases were broad based, with the exception of motor vehicles and parts dealers (-1.3%) and department stores (-0.8%), breathing life into the notion that the consumer remains a driving force of growth for the U.S. economy.
• Initial claims for the week ending January 11 dropped by 10,000 to 204,000 (Briefing.com consensus 217,000). Continuing claims for the week ending January 4 decreased by 37,000 to 1.767 million.
o The key takeaway from the report is that it reflects a tight labor market and has helped squelch a modestly rising uptrend in initial claims.
• Import prices for December were up 0.3%. Excluding fuel, they were flat. Export prices were down 0.2%. Excluding agricultural products, they were down 0.1%.
o The key takeaway from the report is that there were no inflation pressures embedded in the data. Nonfuel import prices were down 1.4% yr/yr while nonagricultural export prices were down 0.6%.
• Total business inventories declined 0.2% month-over-month in November, as expected, following a downwardly revised 0.1% increase (from 0.2%) in October. Total business sales were up 0.7% following a downwardly revised 0.2% decline (from -0.1%) in October.
o The key takeaway from the report is that the gap between inventory growth on a yr/yr basis (+2.8%) and sales growth (+1.0%) should help keep prices in check.
• The Philadelphia Fed Index for January jumped to 17.0 (Briefing.com consensus 3.0) from the revised 2.4 reading in December (from 0.3).
• The NAHB Housing Market Index for January declined to 75 (Briefing.com consensus 74) from 76 in December.

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