Morning Notes – Tuesday January 5, 2021

/ January 5, 2021

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day with a good chance of sideways move around the pre-open level around 3675.00; watch for a break above 3692.00 and below 3670.25 for clarity
  • Key economic data report due during the day:
    • ISM Manufacturing PMI ( 56.6 est; prev. 57.5) at 10:00 AM
    • ISM Manufacturing Prices ( 66.0 est.; prev. 65.4) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3686.48, 3680.49, and 3662.71
  • Critical resistance levels for S&P 500 are 3708.09, 3723.31, and 3744.63
  • Key levels for E-mini futures: break above 3704.00, the high of 6:15 AM and break below 3677.75, the low of 2:45 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (March 2021) closed at 3693.50 and the index closed at 3700.65 – a spread of about -7.00 points; futures closed at 3692.25 for the day; the fair value is +0.75
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -8.00; Dow by -33, and NASDAQ by -45.25

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo and Sydney were down
  • European markets are mostly lower – the UK is up
  • 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 lower
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 0.932%, down 0.9 BP from two weeks ago;
    • 30-years is at 1.682%, down 0.2 BP;
    • 2-years yield is at 0.125%, down 5.1 BP;
    • The 10-Year-&-2-Year spread is at 0.749, up from 0.743
  • VIX
    • At 27.52 @ 8:00 AM; up from the last close; above 5-day SMA;
    • Recent high =  31.46 on December 21; low =  20.99 on December 29
    • Sentiment: Risk-Off-to-Neutral

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

Monthly
  • Confirmed Uptrend
  • December 2020 was a green candle with a small gap and with almost no upper and lower shadows; all-time closing and intraday highs;
    • Stochastic %K above %D near 100;
    • RSI-9 above 70; broke above a downtrend line from January 2018
    • 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 January 1 was a green candle that gapped up; all-time intraday highs;
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI (9) is above 70
  • The week was up +53.01 or +1.4%; the 5-week ATR is 79.31
  • An up week; third in the last five weeks and sixth in the last ten weeks
  • The weekly week pivot point=3746.43, R1=3769.84, R2=3783.60; S1=3732.67, S2=3709.26; R1/R2 pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A Bearish Engulfing candle at the all-time highs; with almost no upper shadow and small lower shadow;
    • Broke above a symmetrical triangle at 3550.00 level on November 9; the 61.8% extension target near 3750.00 is achieved; 100% extension target is near 3900.00
    • %K  crossed below %D; %D Bearish Divergence
    • RSI-9 near 50 from above 70; below 8-day EMA
  • At/above 20-day EMA; above 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Declined from the all-time high of 3773.25 on Monday to near previous support, the low 3651.00 of December 22; bounced up above 3700.00;
    • RSI-21 is around 35
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Bouncing up since 12:00 PM on Monday from a support level;  bounced above 38.2% Fibonacci Retracement level of the earlier decline;
    • RSI-21 is moving between 50 and 40
    • %K is below %D; below 20
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) is moving sideways since 7:45 PM
  • The Bollinger Band is relatively stable since 7:45 PM
    • Stochastic (9, 1, 3): %K is crossing above %D from below 20 at 8:30 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday, January 4 in higher volume. Most indices made Bearish Engulfing candles with almost no upper shadows and small lower shadows. For most, Stochastic %D also made Bearish Divergences. All but one S&P sector – Energy – closed lower.

From Briefing.com:

The major indices were down more than 2.0% on the first trading day of 2021, as investors took profits, but they pared losses in the afternoon. The S&P 500 (-1.5%), Dow Jones Industrial Average (-1.3%), Nasdaq Composite (-1.5%), and Russell 2000 (-1.5%) declined between 1.3-1.5%. The S&P 500 and Dow briefly set all-time highs at the open.

[…]

Influential weakness came out of the information technology (-1.8%) and industrials (-2.6%) sectors, although the real estate (-3.3%) sector was the weakest link. The energy sector (+0.1%) eked out a slim gain despite lower oil prices ($47.59/bbl, -0.68, -1.4%).

[…]

The 2-yr yield finished flat at 0.12%, and the 10-yr yield finished flat at 0.92% after touching 0.95% in the morning. The U.S. Dollar Index finished flat after being down 0.6% intraday.

[…]
  • Total construction spending increased 0.9% in November (Briefing.com consensus 0.9%) after increasing a revised 1.6% (from 1.3%) in October. Total private construction spending rose 1.2% m/m and total public construction spending decreased 0.2%.
  • […]
  • The December IHS Markit Manufacturing PMI increased to 57.1 from 56.5 in November.
[…]
  • Dow Jones Industrial Average -1.3% YTD
  • Nasdaq Composite -1.5% YTD
  • Russell 2000 -1.5% YTD
  • S&P 500 -1.5% YTD
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