Market Remarks

Morning Notes – Friday, February 18, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower 8:45 AM; declining since 11:45 PM; dropped more than 25 points from 8:00 AM
  • The odds are for a down day with elevated volatility; watch for a break above 4399.75 for a change of sentiments
  • Key economic data report due during the day:
    • Existing Home Sales ( 6.10M est.; prev. 6.18M) at 10:00 AM
    • CB Leading Index ( 0.2% est.; prev. 0.8%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4364.84, 4332.40, and 4292.46
  • Critical resistance levels for S&P 500 are 4394.30, 4419.42, and 4456.06
  • Key levels for E-mini futures: break above 4399.75, the high of 8:00 AM and break below 4359.50, the low of 8:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2022) closed at 4375.00 and the index closed at 4380.26 – a spread of about -5.25 points; futures closed at 4374.50 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -7.50; Dow by -121; and NASDAQ by -26.50

Markets Around The World

  • Markets in the East closed mostly lower – Shanghai and Seoul closed higher
  • European markets are lower
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • EUR/USD
    • USD/JPY
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.948%, up +12.1 basis points from two weeks ago;
    • 30-years is at 2.277%, up +13.2 basis points;
    • 2-years yield is at 1.471%, up +27.3 basis points;
    • The 10-Year-&-2-Year spread is at 0.477, down from 0.629
    • The 30-Year-&-10-Year spread is at 0.329, down from 0.318
  • VIX
    • At 28.02 @ 8:30 AM; down from the last close; above the 5-day SMA;
    • Recent high = 32.04 on February 14; low = 19.93 on February 9
    • 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 February 11 was a Bearish Engulfing candle  with a long upper shadow and almost no lower shadow
    • Stochastic (9,1, 3): %K crossed below %D
    • RSI-9 is just above 40
  • The week was down -81.89 or -1.8%; the 5-week ATR  is 206.92
  • A down week; third in the last five weeks, and fifth in the previous ten weeks
  • The weekly pivot point=4470.03, R1=4538.64, R2=4658.65; S1=4350.02, S2=4281.41; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • In Correction
Daily
  • A large red candle that gapped down making a three-day Evening Star pattern albeit after a small rally
    • Stochastic (9, 1, 3): %K crossed below %D; below 10
    • RSI-9 turned down to below 40; below 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Moving down since 8:00 Am on February 16 from a resistance level; near the lows of February 14
    • RSI-21 declined to just above 30 from 60
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sideways to down since 6:00 PM on February 13 within a large range
    • RSI-21 has declined to just above 30
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to down  since 1:15 AM;
  • The Bollinger Band is expanding since 8:00 Am with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crossing above %D at 8:30 AM from below 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Thursday, February 17, in mostly higher volume. Dow Jones Transportation Average traded in lower volume. The indices opened down and then traded lower for the rest of the day.

From Briefing.com:

The S&P 500 dropped 2.1% on Thursday, as risk sentiment remained pressured by negative-sounding Russia-Ukraine headlines. The Nasdaq Composite (-2.9%) and Russell 2000 (-2.5%) posted steeper declines while the Dow Jones Industrial Average (-1.8%) fared slightly better than the S&P 500. […]

Nine of the 11 S&P 500 sectors closed in negative territory, led lower by the information technology (-3.1%), communication services (-3.0%), and consumer discretionary (-2.6%) sectors.

The consumer staples (+0.9%) and utilities (+0.1%) sectors closed higher as part of the defensive shift in the market.

More specifically, Treasuries saw increased demand, pushing the 10-yr yield down eight basis points to 1.97% and the 2-yr yield down five basis points to 1.47%. Gold futures rose 1.7% to $1902.10/ozt. The CBOE Volatility Index jumped 15.7% to 28.11. The U.S. Dollar Index increased 0.1% to 95.87.

[…]
  • January housing starts declined 4.1% month-over-month to a seasonally adjusted annual rate of 1.638 million units (Briefing.com consensus 1.705 million) and building permits increased 0.7% month-over-month to 1.899 million (Briefing.com consensus 1.750 million).
  • […]
  • Initial jobless claims for the week ending February 12 increased by 23,000 to 248,000 (Briefing.com consensus 220,000) and continuing claims for the week ending February 5 declined by 26,000 to 1.593 million.
  • […}
  • The Philadelphia Fed Index for February decreased to 16.0 (Briefing.com consensus 20.4) from 23.2 in January.
[…]
  • Dow Jones Industrial Average -5.6% YTD
  • S&P 500 -8.1% YTD
  • Russell 2000 -9.7% YTD
  • Nasdaq Composite -12.3% YTD

Overseas: 

  • Europe: DAX -0.7%, FTSE -0.9%, CAC -0.3%
  • Asia: Nikkei -0.8%, Hang Seng +0.3%, Shanghai +0.1%

Commodities: 

  • Crude Oil -2.23 @ 91.44
  • Nat Gas -0.21 @ 4.48
  • Gold +26.40 @ 1899.90
  • Silver +0.20 @ 23.82
  • Copper -0.02 @ 4.52
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