Market Remarks

Morning Notes – Wednesday July 21, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility and with a good chance of a sideways to down move from the pre-open levels around 4325.00 levels — watch for a break below 4315.50 and a break above 4338.50 for clarity
  • No key economic data report due during the day:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4320.60, 4292.61, and 4262.05
  • Critical resistance levels for S&P 500 are 4336.51, 4355.41, and 4375.09
  • Key levels for E-mini futures: break above 4338.50, the high of 4:15 AM and break below 4315.50, the low of 7:45 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2021) closed at 4314.75 and the index closed at 4323.06 – a spread of about -8.75 points; futures closed at 4315.50 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 up by +11.25; Dow up by +138, and NASDAQ down by -19.75

Markets Around The World

  • Markets in the East closed mostly higher – Hong Kong and Seoul closed lower; Mumbai was closed for trading
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are mixed
    • Precious metals are mixed
    • Industrial metals are mostly lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.238%, down -13.2 basis points from two weeks ago;
    • 30-years is at 1.902%, down -10.2 basis points;
    • 2-years yield is at 0.18%, down -2.2 basis points;
    • The 10-Year-&-2-Year spread is at 1.040, down from 1.150
  • VIX
    • At 18.89 @ 7:00 AM; down from the last close; above 5-day SMA;
    • Recent high =  25.09 on July 19; low =  15.94 on July 13
    • Sentiment: Risk-On

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

Monthly
  • Confirmed Uptrend
  • May 2021 was a Doji with a small upper shadow and a long lower shadow; at all-time closing and intra-month highs;
    • Stochastic %K above %D near 100;
    • RSI-9 near 80; 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
Weekly:
  • The week ending on July 16 was a Bearish Engulfing with almost no lower shadow
    • Stochastic (9,1, 3): %K crossed below %D; near 90
    • RSI (9) is just turned below 70
  • The week was down – 42.39 or -1.0%; the 5-week ATR is 89.31
  • A down week; second in the last five weeks, and fourth in the last ten weeks
  • The weekly pivot point=4347.79, R1=4373.05, R2=4418.94; S1=4301.90, S2=4276.64; No pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23, 2020
Daily
  • A relatively large green candle that opened near the mid-point of the previous day’s real-body and closed at the upper bound of Monday’s gap with almost no lower shadow and small upper shadow;
    • %K crossed above %D; from below 20 to above 50
    • RSI-9 is bounced above 50 from near 35; below 8-day EMA
  • At/above 20-day EMA; above 50-day EMA, 100-day, and 200-day SMA
  • Uptrend
2-Hour (E-mini futures)
  • Bouncing up since 2:00 PM on July 19 from a low of 4224.00 to near 4330.00;
    • RSI-21 moving around 60
    • Above EMA10 of EMA50, which is above EMA20
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving up since 2:00 PM on Monday; moving sideways since 12:00 PM on Tuesday
    • RSI-21 is moving above 50
    • At/below EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 2:45 PM on Tuesday
  • The Bollinger Band is flattening since 6:15 AM
    • Stochastic (9, 1, 3): %K crossed above %D at 7:45 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Tuesday, July 20 in lower volume. The market opened higher and then for the rest of the day traded higher before plateauing in the afternoon and closing near the highs for the day.  Most indices made Bullish Engulfing or similar bullish candlestick formations.

From Briefing.com:

The major indices rallied by at least 1.5% on this “turnaround Tuesday,” as investors bought Monday’s dip and sold longer-dated Treasuries. The Russell 2000 was the outright winner with a 3.0% gain, followed by the Dow Jones Industrial Average (+1.6%), Nasdaq Composite (+1.6%), and S&P 500 (+1.5%). […]

The rebound gains were distributed across ten of the 11 S&P 500 sectors, including industrials (+2.7%) and financials (+2.4%) with gains over 2.0%. Advancing issues outpaced declining issues by a 5:1 margin at the NYSE. The consumer staples sector (-0.1%) bucked the positive trend.

[…]

The 10-yr yield settled three basis points higher at 1.21% after dipping below 1.14% immediately following mixed housing starts and building permits data for June. Housing starts were better than expected while permits, which are a leading indicator, declined 5.1% m/m to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).

The 2-yr yield decreased two basis points to 0.19% while the 30-yr yield rose five basis points to 1.87%. The U.S. Dollar Index increased 0.1% to 92.95. WTI crude futures rose 1.4%, or $0.90, to $67.32/bbl. The CBOE Volatility Index (19.73, -2.77, -12.3%) slipped below 20.00.

[…]
  • Total housing starts rose 6.3% month-over-month to a seasonally adjusted annual rate of 1.643 million (Briefing.com consensus 1.600 million). Building permits declined 5.1% month-over-month to a seasonally adjusted annual rate of 1.598 million (Briefing.com consensus 1.700 million).
[…]
  • S&P 500 +15.1% YTD
  • Dow Jones Industrial Average +12.8% YTD
  • Nasdaq Composite +12.5% YTD
  • Russell 2000 +11.1% YTD

Overseas: 

  • Europe: DAX +0.6%, FTSE +0.5%, CAC +0.8%
  • Asia: Nikkei -1.0%, Hang Seng -0.9%, Shanghai -0.1%

Commodities: 

  • Crude Oil +1.19 @ 67.41
  • Nat Gas +0.09 @ 3.87
  • Gold +0.20 @ 1809.40
  • Silver -0.16 @ 24.99
  • Copper +0.08 @ 4.27
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