Market Remarks

Morning Notes – Tuesday January 28, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility
  • Futures are up nearly 20 points and there is great chance that the next move could be sideways from pre-open low levels
  • Key economic data due:
    • Durable Goods ( 2.4% vs. 1.2% est. ; prev. -2.1% ) at 8:30 AM
    • Core Durable Goods (-0.1% vs. 0.4% est. ; prev. -0.1%) at 8:30 AM
    • S&P/CS Composite-20 HPI ( 2.6% vs. 2.5% est.; prev. 2.2% ) at 9:00 AM
    • CB Consumer Confidence ( est. 128.2 ; prev. 126.5 ) at 10:00 AM
    • Richmond Manufacturing Index ( est. -3; prev. -5) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3242.49, 3234.50 and 3232.43
  • Critical resistance levels for S&P 500 are 3258.85, 3260.86 and 3277.19
  • Key levels for eMini futures: break above 3263.50, the high of 2:00 AM and break below 3241.75, the low of 6:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3242.25 and the index closed at 3243.63 – a spread of about -1.50 points; futures closed at 3239.50 for the day; the fair value is +2.75
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +18.0; Dow by +123 and NASDAQ by +68.00

Markets Around The World

  • Markets in the East were closed mostly lower – Shanghai and Hong Kong were closed for trading
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Cotton
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 1.620%, up from January 27 close of 1.681%;
    • 30-years is at 2.071%, up from 2.182%
    • 2-years yield is at 1.431%, down from 1.433%
    • The 10-Year-&-2-Year spread is at 0.189 down from 0.192
  • VIX
    • Is at 17.00 down -1.23 from January 27; above 5-day SMA
    • Next high resistance is 21.46, the high of October 2, 2019; the low support is the 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 24 was a red harami candle with small upper and lower shadows that made all time high
    • Continuing the break above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D; above 90; potential bearish divergence
    • RSI (9) has turned down below 80; potential Bearish Divergence with January 2018 level
  • Last week was down -34.15 or -1.0%; the 5-week ATR is 52.53
  • Last week’s pivot point=3304.92, R1=3328.32, R2=3361.16; S1=3272.08, S2=3248.68; S1 pivot level was breached
  • A down week; second in last five weeks and third in last ten weeks
  • Near 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 like candle that gapped down at the open
    • %K is below %D; below 10;
    • RSI-9 has turned down; below 40; below 8-day SMA; potential Bearish Divergence
  • Below 20-day EMA; above 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Sideways move since 6:00 PM on Sunday after the gap down open for the week; downward pressure since 8:00 AM on Friday; the next significant support is near 3181.00, the low of 6:00 PM on January 7
    • RSI-21 is rising since making a low of 12 at 4:00 AM on Monday; near 50
    • %K is crisscrossing %D higher from near zero; above 60
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways since 6:00 PM on Sunday between a high of 3269.75 and a low of 3233.00; a break above will have a resistance and the gap high of 3280.25; the 50% extension target is near 3287.00
    • RSI-21 is moving up since Sunday low near 20; made Bullish Divergence at 9:00 AM on Monday;
    • %K is crossing below %D from above 80
  • At/above 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 10:45 PM on Sunday
  • The Bollinger Band is relatively stable since 9:15 AM on Monday though is larger from recent past
  • Stochastic (9, 1, 3): %K is below %D since 7:15 AM;
  • Bias: Side

Previous Session

Major U.S. indices closed sharply lower on Monday, January 27 in mixed volume. Dow Jones Transportation Average and NASDAQ Composite traded in higher volume. All S&P sectors closed down.

Major indices gapped down at the open and did not close to closing the gap. However, most closed near the open and made doji like candles.

From Briefing.com:

The large-cap indices retreated more than 1.5% on Monday, as the continued outbreak of the coronavirus triggered more profit taking and some overdue selling. The S&P 500 lost 1.6%, the Dow Jones Industrial Average lost 1.6%, and the Nasdaq Composite lost 1.9%. The Russell 2000 declined 1.1%.

[…]

Treasuries. The 2-yr yield fell five basis points to 1.43%, and the 10-yr yield fell eight basis points to 1.61%. The U.S. Dollar Index increased 0.1% to 97.94.

[…]

• New home sales decreased 0.4% m/m in December to a seasonally adjusted annual rate of 694,000 units (Briefing.com consensus 725,000) from a downwardly revised 697,000 (from 719,000) in November.
o The key takeaway from the report is that new home sales were still strong on a year-over-year basis (+23.0%), benefiting from the drop in mortgage rates and the extremely tight supply of existing homes for sale.

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