Market Remarks

Morning Notes – Thursday December 17, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher ;
  • The odds are for an up day with a good chance of sideways to down move from the pre-open level around 3715.00; watch for a break below 3704.75 for clarity
  • Key economic data report due during the day:
    • Unemployment Claims ( 817K est’; prev. 853K) at 8:30 AM
    • Philly Fed Manufacturing Index ( 20.1 est.; prev. 26.3) at 8:30 AM
    • Building Permits ( 1.55M est.; prev. 1.54M) at 8:30 AM
    • Housing Starts ( 1.53M est.; prev. 1.53M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3695.29, 3686.38, and 3678.01
  • Critical resistance levels for S&P 500 are 3723.04, 3734.80, and 3751.52
  • Key levels for E-mini futures: break above 3717.50, the high of 4:30 AM and break below 3683.00, the low of 2:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2021) closed at 3694.75 and the index closed at 3701.17 – a spread of about -6.50 points; futures closed at 3693.75 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +18.25; Dow by +109, and NASDAQ by +62.75

Markets Around The World

  • Markets in the East closed mostly higher – Seoul and Singapore were down
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are higher
    • Most soft commodities mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 0.920%, down 2.8 BP from two weeks ago;
    • 30-years is at 1.666%, down 3.8 BP;
    • 2-years yield is at 0.125%, down 5.1 BP;
    • The 10-Year-&-2-Year spread is at 0.795, up from 0.756
  • VIX
    • At 22.00 @ 6:30 AM; down from the last close; below 5-day SMA;
    • Recent high =  27.27 on November 12; low =  19.51 on November 27
    • Sentiment: Risk-On

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend Resumed
  • November 2020 was a large green candle with small upper and lower shadows; all-time closing and intraday highs
    • Stochastic %K crossed above %D near 100;
    • RSI-9 near 70; breaking above a downtrend line from January 2018
    • Crossing above the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on December 11 was a relatively small Harami candle, a spinning top candle with small upper and lower shadows; made an all-time intraday high;
    • Stochastic (9,1, 3): %K is crossing below %D; above 90
    • RSI (9) is turning down from near 70
  • The week was down -35.66 or -1.0%; the 5-week ATR is 99.31
  • A down week; fourth in the last five weeks and seventh in the last ten weeks
  • The weekly week pivot point=3669.75, R1=3706.10, R2=3748.74; S1=3627.11, S2=3590.76; no pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A small Doji candle with small upper and lower shadows near all-time highs;
    • Broke above a symmetrical triangle at 3550.00 level on November 9; the 61.8% extension target is near 3750.00; 100% extension target is near 3900.00
    • %K  is above %D; from below 20 to above 70
    • RSI-9 turning up above 60; at/above 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Breaking above the all-time high after bouncing up from 3636.25 since 2:00 PM on Monday; breaking above a Horizontal Channel – the 61.8% extension target is near 3762.00 and 100% extension target is near 3790.00
    • RSI-21 is above 70
  • Above EMA20 but at/below EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Trending higher up since 12:00 AM on December 15;
    • RSI-21 is moving between 60 and 65
    • %K is below %D since 3:00 AM; near 25
  • Above EMA20, which is at EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) is steadily moving up since December 15
  • The Bollinger Band is relative narrow
    • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Up

Previous Session

Major U.S. indices closed mostly higher on Wednesday, December 16 in lower volume. Dow Jones Industrial Average and Russell 2000 closed down. Indices opened higher and traded higher till mid-morning before falling to negative territories. The indices turned around following FOMC press conference in the afternoon.

From Briefing.com:

The S&P 500 (+0.2%) edged higher on Wednesday, as investors were content to hear that a stimulus deal is close to being reached and that the Fed remained committed to its dovish monetary policy framework. The Nasdaq Composite (+0.5%) closed at a record high, while the Dow Jones Industrial Average (-0.2%) and Russell 2000 (-0.4%) closed lower.

The consumer discretionary (+1.1%) and information technology (+0.7%) sectors led the market higher, but the broader market was generally mixed as investors had largely anticipated these events during yesterday’s rally. The utilities (-1.2%), industrials (-0.6%), energy (-0.4%), and materials (-0.3%) sectors closed lower.

[…]

U.S. Treasuries finished near their flat lines in a tight-ranged session that supported the view that the market wasn’t surprised by the stimulus update or the Fed. The 2-yr yield was flat at 0.12%, and the 10-yr yield was flat at 0.92%. The U.S. Dollar Index decreased 0.2% to 90.32. WTI crude futures increased 0.5%, or $0.24, to $47.83/bbl.

[…]
  • Total retail sales declined 1.1% m/m in November (Briefing.com consensus -0.2%) on top of a downwardly revised 0.1% decline (from +0.3%) in October. Retail sales, excluding autos, declined 0.9% (Briefing.com consensus +0.1%) after declining a downwardly revised 0.1% (from +0.2%) in October.
  • […]
  • The NAHB Housing Market Index decreased to two points to 86 in December (Briefing.com consensus 88).
  • Business inventories increased 0.7% in October (Briefing.com consensus 0.6%) following an upwardly revised 0.8% increase in October (from 0.7%).
  • The preliminary IHS Markit Manufacturing PMI for December decreased to 56.5 from 56.7 in November, while the Services PMI decreased to 55.3 from 58.4 in November.
  • The weekly MBA Mortgage Applications Index increased 1.1% following a 1.2% decline in the prior week.
[…]
  • Nasdaq Composite +41.1% YTD
  • Russell 2000 +17.0% YTD
  • S&P 500 +14.6% YTD
  • Dow Jones Industrial Average +5.7% YTD
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