Morning Notes – Thursday, February 3, 2022

/ February 3, 2022

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; down more than 25 points  since 7:45 AM
  • The odds are for a down day with elevated volatility; watch for a break above 4544.00 for a change of sentiments
  • Key economic data report due during the day:
    • Bank of England Monetary Policy Report at 7:00 AM
    • Challenger Job Cuts (-76.5%; prev. -75.3%) at 7:30 AM
    • ECB Monetary Policy Statement at 7:45 AM
    • ECB Press Conference at 8:30 AM
    • Unemployment Claims ( 238K vs. 245K est.; prev. 261K) at 8:30 AM
    • Preliminary Nonfarm Productivity (6.6% vs. 3.8% est; prev. -5.2%) at 8:30 AM
    • Prelim Unit Labor Costs ( 0.3% vs. 1.1% est.; prev. 9.6%) at 8:30 AM
    • Final Services PMI ( 50.9 est.; prev. 50.9) at 9:45 AM
    • ISM Services PMI ( 59.5 est.; prev. 62.0) at 10:00 AM
    • Factory Orders (-0.4% est.; prev. 1.6% ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4516.97, 4504.45, and 4483.53
  • Critical resistance levels for S&P 500 are 4544.32, 4569.29, and 4595.31
  • Key levels for E-mini futures: break above 4540.75, the high of 7:30 AM and break below 4494.50, the low of 12:30 PM on February 1

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2022) closed at 4577.25 and the index closed at 4589.38 – a spread of about -12.00 points; futures closed at 4577.25 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -46.50; Dow by +-70; and NASDAQ by -320.25

Markets Around The World

  • Markets in the East closed mixed – Tokyo, Syndey, and Mumbai closed lower; Seoul and Singapore closed up; Shanghai and Hong Kong were closed
  • European markets are mostly lower – Spain is higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.804%, down -2.3 basis points from two weeks ago;
    • 30-years is at 2.138%, unchanged;
    • 2-years yield is at 1.154%, up +9.9 basis points;
    • The 10-Year-&-2-Year spread is at 0.650, down from 0.772
    • The 30-Year-&-10-Year spread is at 0.334, up from 0.311
  • VIX
    • At 23.09 @ 7:00 AM; up from the last close; below the 5-day SMA;
    • Recent high = 38.9 on January 24; low =  17.36 on January 12
    • Sentiment: Risk-Off

The trend and patterns in 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 28 was a green candle that looked like a hammer with a small upper shadow;
    • Stochastic (9,1, 3): %K is crossing above %D from near zero
    • RSI-9 has turned up; just below 40
  • The week was up +33.91 or +0.8%; the 5-week ATR  is 180.75
  • An up week; second in the last five weeks, and fourth in the previous ten weeks
  • The weekly pivot point=4369.23, R1=4515.85, R2=4599.84; S1=4285.24, S2=4138.62; S1/S2 pivot levels were breached
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • In Correction
Daily
  • A relatively small green candle with a small lower shadow and a smaller upper shadow; above a resistance level at the low of December 3, 2021
    • Stochastic (9, 1, 3): %K is above %D; above 90
    • RSI-9 is just below 60; above 8-day EMA;
  • Above 20-day EMA; at/above 50-day EMA above 100-day SMA and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Drifting down since 12:00 PM on Wednesday from a resistance level at the downtrend line from the all-time highs; downtrend since January 4 – lower lows and lower highs;
    • RSI-21 moved from above 75 to just above 50
    • Above EMA 20, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Moving sideways to downs since 4:30 PM on Wednesday broke above a Horizational Channel between 4440.00 and 4260.00; the 61.8% extension target near 4551.24 is achieved and the 100% extension target is near 4620.00
    • RSI-21 is moving between 50 and 40
    • At/below EMA20, which is at/below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting sideways to down since 11:00 PM
  • The Bollinger Band is expanding since 4:30 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is below %D since 7:45 AM; below 20
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, February 2, in mostly lower volume. Russell 2000 closed lower and NASDAQ COmposite traded in higher volume. The major indices opened up and then drifted higher for most of the day.

From Briefing.com:

The S&P 500 advanced 0.9% on Wednesday, driven by Alphabet (GOOG 2960.73, +203.16, +7.4%) following its earnings report and helped by lingering rebound momentum. The Dow Jones Industrial Average (+0.6%) and Nasdaq Composite (+0.5%) followed suit, while the Russell 2000 fell 1.0%.

[…]

Despite the strong performance in the S&P 500, and the gains in ten of its 11 sectors, there wasn’t the same level of bullishness from the prior days.

[…]

The 2-yr yield decreased one basis point to 1.15%, and the 10-yr yield decreased two basis points to 1.77%. The U.S. Dollar Index fell 0.4% to 95.99 amid relative strength in the euro, which was a byproduct of ECB rate-hike expectations.

WTI crude futures settled little changed ($88.17/bbl, -0.04, -0.1%). In related news, OPEC+ reaffirmed its decision to increase production by 400,000 barrels per day in March, and the EIA reported an unexpected draw in weekly crude inventories (1.05 million).

[…]
  • The ADP Employment Change report estimated a net-loss of 301,000 jobs to private-sector payrolls in January (Briefing.com consensus +220,000). The increase in December was downwardly revised to 776,000 from 807,000.
  • The weekly MBA Mortgage Applications Index rose 12.0% following a 7.1% decline in the prior week.
[…]
  • Dow Jones Industrial Average -2.0% YTD
  • S&P 500 -3.7% YTD
  • Nasdaq Composite -7.9% YTD
  • Russell 2000 -9.6% YTD

Overseas: 

  • Europe: DAX +0.1%, FTSE +0.6%, CAC +0.2%
  • Asia: Nikkei +1.7%, Hang Seng closed for holiday, Shanghai closed for holiday

Commodities: 

  • Crude Oil +0.29 @ 88.21
  • Nat Gas +0.61 @ 5.45
  • Gold +7.20 @ 1808.60
  • Silver +0.14 @ 22.70
  • Copper +0.07 @ 4.49
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