Market Remarks

Morning Notes – Monday, January 10, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:15 AM; declining since 2:30 AM
  • The odds are for a down day with elevated volatility; watch for a break above 4681.75 for a change of sentiments
  • Key economic data report due during the day:
    • Final Wholesale Inventories ( 1.2% est.; prev. 1.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4631.97, 4614.20, and 4583.16
  • Critical resistance levels for S&P 500 are 4662.74, 4675.99, and 4695.72
  • Key levels for E-mini futures: break above 4666.50, the low of 4:30 PM on Friday and break below 4622.25, the low of 2:00 PM on December 22

Pre-Open

  • On Friday at 4:00 PM, S&P futures (March 2022) closed at 4668.75 and the index closed at 4677.03 – a spread of about -8.25 points; futures closed at 4667.75 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -30.25; Dow Down by -80; and NASDAQ by -191.75

Markets Around The World

  • Markets in the East closed mostly higher – Sydney and Seoul closed down;  Tokyo id not trade
  • European markets mostly lower – Spain is higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • Dollar index
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.796%, up +30.3 basis points from two weeks ago;
    • 30-years is at 2.138%, up +23.3 basis points;
    • 2-years yield is at 0.866%, up +17.5 basis points;
    • The 10-Year-&-2-Year spread is at 0.930, up from 0.802
    • The 30-Year-&-10-Year spread is at 0.342, down from 0.412
  • VIX
    • At 21.04 @ 8:30 AM; up from the last close; above 5-day SMA;
    • Recent high = 27.39 on December 20; low =  16.34 on January 4
    • Sentiment: Risk-Off

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

Monthly
  • December 2021 was a green candle that opened above the previous week’s real-body and closed higher with a small upper shadow and a slightly longer lower shadow; at all-time highs
    • Stochastic (9, 1, 3): %K crossed above %D; above 90;
    • RSI-9 is turning up from above 75;
    • Above the upper band of a 120-month regression channel;
  • Confirmed Uptrend: sequence of higher highs and higher lows
Weekly:
  • The week ending on January 7 was a relatively large Bearish Engulfing candle at all-time highs
    • Stochastic (9,1, 3): %K crossed below %D;
    • RSI-9 is turned down below 60
  • The week was down -89.15 or -1.9%; the 5-week ATR  is 151.11
  • A down week; second in the last five weeks, and fifth in the previous ten weeks
  • The weekly pivot point=4719.46, R1=4776.19, R2=4875.34; S1=4620.31, S2=4563.58; R1/S1/S2 pivot levels were breached
  • Above 10-week EMA; above 39-week SMA; above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A red spinning top candle that closed below the previous day’s close
    • Stochastic (9, 1, 3): %K is below %D; below 10;
    • RSI-9 is near 40; below 8-day EMA;
  • Below 20-day EMA; above 50-day EMA, 100-day SMA, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Trending down since 8:00 Am on January 4; broke below a Double Top pattern; breaking below after a sideways move since 2:00 PM on January 5
    • RSI-21 is trending down in steps since 2:00 PM on December 27; below a downtrend line; made few Bearish Divergences; another Potential Bearish Divergence
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (E-mini futures)
  • Breaking below a down sloping channel that lasted from January 5 to January 9;
    • RSI-21 is moving down; around 30;
    • Below EMA20, which is Below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 9:30 PM on January 5
  • The Bollinger Band is expanding since 5:30 Am with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D below 10
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Friday, January 7, in mixed volume. NYSE Composite closed lower. Dow Jones Transportation Average and NASDAQ Composite traded in higher volume.

For the week, major US Indices closed lower in higher volume. Asian and European stocks were mixed. The dollar index was up, energy futures were up, precious metals and industrial metals were mostly down and soft commodities closed mostly higher.The US Treasury yields inched up for the week.

From Briefing.com:

The S&P 500 declined 0.4% on Friday, as money continued to flow away from growth stocks and into value stocks as the 10-yr yield hit 1.80% intraday. […]

More clearly, the Russell 3000 Growth Index fell 1.1% while the Russell 3000 Value Index rose 0.2%. The small-cap Russell 2000 declined 1.2%.

From a sector perspective, the S&P 500 information technology (-1.0%) and consumer discretionary (-1.7%) sectors underperformed in negative territory. Conversely, the energy (+1.5%) and financials (+1.2%) sectors rose more than 1.0%, extending their weekly gains to more than 10.0% and 5.0%, respectively.

[…]

The 10-yr yield, as mentioned, hit 1.80% in the hours following the employment report, but ended the session at 1.77%, or four basis points above yesterday’s settlement. The 2-yr yield decreased two basis points to 0.87%. The U.S. Dollar Index fell 0.6% to 95.75. WTI crude futures fell 0.6%, or $0.46, to $78.94/bbl.

[…]
  • December payrolls growth was quite weak, but that shouldn’t remain the case as we get past the Omicron hurdle. The unemployment rate fell to an astounding 3.9%, although the labor force participation rate did not improve. It held steady at 61.9%. Average hourly earnings were up a stronger than expected 0.6%.
  • […]
  • Consumer credit increased by $39.9 bln in November. The prior month saw a downward revision to $16.1 bln from $16.9 bln.
[…]
  • Dow Jones Industrial Average -0.3% YTD
  • S&P 500 -1.9% YTD
  • Russell 2000 -2.9% YTD
  • Nasdaq Composite -4.5% YTD
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