Morning Notes – Wednesday January 6, 2021

/ January 6, 2021

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways to down day; watch for a break above 3719.25 and below 3685.50 for clarity
  • Key economic data report due during the day:
    • ADP Non-Farm Employment Change ( -123K vs. 60K est.; prev. 304K) at 8:15 AM
    • Final Services PMI ( 55.2 est.; prev. 55.3) at 10:00 AM
    • Factory Orders ( 0.7% est.; prev. 1.0%) at 10:00 AM
    • FOMC Meeting Minutes at 2:00 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3697.34, 3680.49, and 3662.71
  • Critical resistance levels for S&P 500 are 3722.48, 3733.02, and 3737.83
  • Key levels for E-mini futures: break above 3719.25, the high of 2:30 AM and break below 3685.50, the low of 4:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (March 2021) closed at 3717.50 and the index closed at 3726.86 – a spread of about -9.00 points; futures closed at 3718.25 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are mixed – at 8:30 AM, S&P 500 futures were down by -7.25; Dow up by +53, and NASDAQ down by -163.75

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, and Singapore closed up; Tokyo, Sydney, Mumbai, and Seoul were down
  • European markets are mostly higher – Switzerland is down
  • 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 are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 0.955%, up 3..7 BP from two weeks ago;
    • 30-years is at 1.705%, up 5.2 BP;
    • 2-years yield is at 0.125%, up 0.4 BP;
    • The 10-Year-&-2-Year spread is at 0.949, up from 0.834
  • VIX
    • At 25.22 @ 6:45 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-On-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 green Harami candle with small upper and lower shadows;
    • 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  turning up but below %D; %D Bearish Divergence on Monday
    • RSI-9 turning up from 50; 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)
  • Bouncing off from a support, the low 3651.00 of December 22, to a resistance zone around 3705.00;
    • RSI-21 is around 50
  • At/above EMA20, which is below EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Bouncing up since 12:00 PM on Monday from a support level in an up-sloping flag, which is bearish in nature;  bounced above 62.8% Fibonacci Retracement level of the earlier decline;
    • RSI-21 is moving around 50
    • %K is crisscrossing %D higher
    • At/above EMA20, which is below EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) is moving sideways since 4:45 PM on Monday
  • The Bollinger Band is relatively stable, but expanded, since Monday
    • Stochastic (9, 1, 3): %K is below %D; around 45
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday, January 5 in lower volume. Most indices made green Harami candles with small upper and lower shadows. All but two S&P sectors – Utilities and Real Estate – closed higher.

From Briefing.com:

The S&P 500 advanced 0.7% on Tuesday in a relatively broad-based advance led by energy sector (+4.5%). The Russell 2000 (+1.7%) outperformed, followed by the Nasdaq Composite (+1.0%) and Dow Jones Industrial Average (+0.6%).

[…]

Energy stocks followed oil prices higher ($49.91/bbl, +2.32, +4.9%), which settled close to $50 per barrel.

[…]

The materials (+2.3%) and industrials (+1.0%) sectors were other cyclical outperformers, while the real estate sector (-0.1%) was the lone holdout.

[…]

Longer-dated Treasury yields rose amid increased selling interest as part of the recovery-minded trade today. The 2-yr yield finished flat at 0.12%, while the 10-yr yield increased four basis points to 0.96%. The U.S. Dollar Index decreased 0.4% to 89.51.

[…]
  • The ISM Manufacturing Index rose to 60.7% in December (Briefing.com consensus 56.4%) from 57.5% in November. The dividing line between expansion and contraction is 50.0%, so the December reading reflects an acceleration in manufacturing activity.
[…]
  • Russell 2000 +0.2% YTD
  • Nasdaq Composite -0.5% YTD
  • Dow Jones Industrial Average -0.7% YTD
  • S&P 500 -0.8% YTD
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