Market Remarks

Morning Notes – Friday, February 25, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:30 AM; moved up more than 80 points from the 3:30 AM low of 4227.50
  • The odds are for an up day with elevated volatility; watch for a break below 4284.50 for a change of sentiments
  • Key economic data report due during the day:
    • Core PCE Price Index ( 0.5% vs. 0.5% est.; prev. 0.5%) at 8:30 AM
    • Core Durable Goods Orders ( 1.6% vs. 1.1% est.; prev. -0.7%) at 8:30 AM
    • Personal Income ( 0.0% vs. -0.3% est.; prev. 0.4%) at 8:30 AM
    • Perosnal Spending ( 2.1% vs. 1.6% est.; prev. -0.8%) at 8:30 AM
    • Revised UoM Consumer Sentiment ( 61.7 est.; prev. 61.7) at 10:00 AM
    • Pending Home Sales ( 1.5% est.; prev. -3.8% ) at 10:00 AM
    • Revised UoM Inflation Expectations ( prev. 5.0%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4268.09, 4244.97, and 4231.23
  • Critical resistance levels for S&P 500 are 4341.51, 4362.12, and 4381.71
  • Key levels for E-mini futures: break above 4337.00, the high of 8:00 AM on February 23, and break below 4284.50, the low of 8:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2022) closed at 4286.00 and the index closed at 4288.70 – a spread of about -2.75 points; futures closed at 4284.00 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +8.25; Dow by +41; and NASDAQ by +45.50

Markets Around The World

  • Markets in the East closed mostly higher – Hong Kong closed lower
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • GBP/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.969%, down -6.2 basis points from two weeks ago;
    • 30-years is at 2.293%, down -1.6 basis points;
    • 2-years yield is at 1.588%, up +0.1 basis points;
    • The 10-Year-&-2-Year spread is at 0.381, down from 0.444
    • The 30-Year-&-10-Year spread is at 0.324, up from 0.278
  • VIX
    • At 30.74 @ 7:00 AM; up from the last close; above the 5-day SMA;
    • Recent high = 37.79 on February 24; low = 23.88 on February 16
    • Sentiment: Risk-Off (High Volatility)

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 18 was a spinning top candle with a longer upper shadow
    • Stochastic (9,1, 3): %K is below %D
    • RSI-9 is just above 35
  • The week was down -69.77 or -1.6%; the 5-week ATR  is 206.07
  • A down week; third in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4388.55, R1=4355.55, R2=4406.34; S1=4260.54, S2=4216.32; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • In Correction
Daily
  • A relatively large green Piercing candle with a lower shadow less than one-fourth of the real body and almost no upper shadow; breaking below a major support level; the day’s range was more than 180 points or more than 4%;
    • Stochastic (9, 1, 3): %K crossed above %D from near 0
    • RSI-9 bounced up to near 40 from near 25; 30; below 8-day EMA; Bullish Divergence
  • Below 20-day EMA, 50-day EMA, 100-day SMA, 200-day SMA
  • In Correction
2-Hour (E-mini futures)
  • Downtrend since 4:00 AM on January 4; bounced up more than 180 points from February 24 low of 4101.75; broke below a not-so-perfect upsloping flag at 4:00 PM on February 11 – the 61.8% extension target near 4208 is achieved and the 100% extension target is near 3977.38;
    • RSI-21 has risen to near 55 from below 20
    • Above EMA20 but below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Breaking above a down-sloping flag – the 61.8% extension target is near 4345.00 and the 100 % extension target is near 4420.00
    • RSI-21 is moving above 50 since 10:30 AM on Thursday
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up since 9:00 AM;
  • The Bollinger Band is expanding slightly since 7:00 AM with price walking up the upper band
    • Stochastic (9, 1, 3): %K crisscrossing %D higher; above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Thursday, February 24, in higher volume. Major indices gapped down at the open and made the day’s low in the first half-hour of trading. The indices then turned around and climbed higher for the rest of the day and closed near the highs.

From Briefing.com:

The S&P 500 dropped as much as 2.6% on Thursday after Russia invaded Ukraine, but the benchmark index ended the session up 1.5% in a buy-the-dip trade led by the mega-caps/growth stocks.

The Nasdaq Composite rose 3.3% after being down 3.5% intraday. The Russell 2000 rose 2.6% after being down 2.6% intraday. The Dow Jones Industrial Average rose 0.3% after being down 2.6% intraday.

[…]

All 11 S&P 500 sectors were trading lower, and Russia’s MOEX and RTS indices tanked 33% and 38%, respectively.

[…]

The most beaten-up stocks — including the mega-caps — in the S&P 500 information technology (+3.5%), communication services (+3.1%), and consumer discretionary (+2.5%) sectors helped lift the market into positive territory.

[…]

Conversely, the consumer staples (-1.7%), financials (-1.2%), energy (-0.9%), and materials (-0.3%) sectors were the four sectors that still closed lower.

[…]

In the Treasury market, the 2-yr yield declined six basis points to 1.54% after touching 1.46% overnight. The 10-yr yield declined one basis point to 1.97% after touching 1.84% overnight. The U.S. Dollar Index rose 0.9% to 97.03. Gold futures rose 0.9% to $1926.60/ozt but turned negative after the settlement time. 

[…]
  • New home sales decreased 4.5% month-over-month in January to a seasonally adjusted annual rate of 801,000 units (Briefing.com consensus 805,000) from an upwardly revised 839,000 (from 811,000) in December.
  • […]
  • Initial jobless claims for the week ending February 19 decreased by 17,000 to 232,000 (Briefing.com consensus 240,000) and continuing claims for the week ending February 12 decreased by 112,000 to 1.476 million — the lowest level since March 14, 1970.
  • […]
  • Q4 GDP was revised up to 7.0%, as expected, from the advance estimate of 6.9%, but the GDP Price Deflator was also revised up to 7.1% (Briefing.com consensus 6.9%) from the advance estimate of 6.9%.
[…]
  • Dow Jones Industrial Average -8.6% YTD
  • S&P 500 -10.0% YTD
  • Russell 2000 -11.2% YTD
  • Nasdaq Composite -13.9% YTD

Overseas: 

  • Europe: DAX -4.0%, FTSE -3.9%, CAC -3.8%
  • Asia: Nikkei -1.8%, Hang Seng -3.2%, Shanghai -1.7%

Commodities: 

  • Crude Oil +1.10 @ 93.28
  • Nat Gas +0.06 @ 4.67
  • Gold -20.50 @ 1888.80
  • Silver -0.55 @ 23.94
  • Copper 0.00 @ 4.47
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