Market Remarks

Morning Notes – Thursday, January 26, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; broke below a Horizontal Channel following a large swing after the GDP and Unemployment Claims report at 8:30 AM – the 61.8% extension target is near 4120.00, and the 100% extension target is near 4150.00
  • The odds are for an up day with elevated volatility – watch for a break below 4037.00 for a change of sentiments
  • The major economic data report is due during the day:
    • Advance GDP ( 2.9% vs. 2.6% est.; prev. 3.2%) at 8:30 AM
    • Advance GDP Price Index (3.5% vs. 3.2% est.; prev. 4.4%) at 8:30 AM
    • Core Durable Goods Orders ( -0.1% vs. -0.2% est.; prev. 0.1%) at 8:30 AM
    • Durable Goods Orders ( 5.6% vs. 2.4% est.; prev. -2.1% ) at 8:30 AM
    • Unemployment Claims ( 186K vs. 203K est.; prev. 192K) at 8:30 AM
    • Goods Trade Balance ( -90.3B vs. -88.4B est.; prev. -82.9B) at 8::30 AM
    • Prelim Wholesale ( 0.1% vs. 0.5% est.; prev. 1.0%) at 8:30 AM
    • New Home Sales ( 610K est.; prev. 640K ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4019.55, 4005.28, and 3997.04
  • Critical resistance levels for S&P 500 are 4039.31, 4053.76, and 4061.89
  • The key levels for E-mini futures are a break above 4068.75, the high at 7:30 AM, and a break below 4037.00, the low at 8:30 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2023) closed at 4032.50, and the index closed at 4016.22 – a spread of about +16.25 points; the futures closed at 4032.00; the fair value is -0.50
  • Pre-NYSE session open, futures were higher – at 8:30 AM, S&P 500 futures were up by +12.75, Dow by +7, and NASDAQ by +68.00

Markets Around The World

  • Markets in the East closed mostly higher – Hong Kong, Seoul, and Singapore closed up; Tokyo closed down; Shanghai, Sydney, and Mumbai were closed
  • European markets are mostly higher – Switzerland is down
  • Currencies (Compared to two weeks ago):
Up Down
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.495, down -5.9 basis points from two weeks ago;
    • The 30-year is at 3.654%, down -2.5 basis points;
    • The 2-year yield is at 4.128%, down -8.8 basis points;
    • The 10-Year-&-2-Year spread is at -0.633, up from -0.662
    • The 30-Year-&-10-Year spread is at 0.159, up from 0.125
  • VIX
    • At 19.16 @ 8:00 AM; up from the last close; below the 5-day SMA;
    • Recent high = 23.76 on January 3; low = 18.01 on January 13
    • Sentiment: Risk-On

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

Weekly:
  • The week ending on January 20 was a small red candle with a small upper shadow and a long lower shadow
    • Stochastic (9,1, 3): %K is above %D; just below 60;
    • RSI-9 is around 55
  • The week was up +104.01 or +2.7%; the 5-week ATR  is 142.86
  • A down week, third in the last five weeks, and sixth in the previous ten weeks;
  • The weekly pivot point=3957.85, R1=4030.15, R2=4087.70; S1=3900.30, S2=3828.00; S1 pivot level was breached
  • Above 10-week EMA and 39-week SMA; below 89-week SMA
  • Under Pressure
Daily
  • A Hammer-like candle after a small decline; at the downtrend line from January 2022 high
    • Stochastic (9, 1, 3): %K is at/above %D; above 80
    • RSI-9 is near 65; above 8-DMA
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend Resumed
2-Hour (E-mini futures)
  • A V-shaped bounce following a sharp decline on Wednesday; effectively no change since 2:00 PM on Monday;  Cup-With-Handle pattern is emerging – a break above 4060.00 will have a first target around 4120.00 and a second target around 4210.00
    • RSI-21 bounced up to around 65 from below 30
    • Above EMA20, which is above EMA10 of EMA50 
  • Bias:  Side-Up
30-Minute (E-mini futures)
  • At the top edge of a horizontal channel or a Double Top – a break above 4056.75 will have a 61.8% extension target near 4120.00 and the 100% extension target near 4150.00
    • RSI-21 is moving around 65
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving sideways to up since 8:15 PM
  • The Bollinger Band has been expanding a bit since 7:45 AM with large swings
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly mixed on Wednesday, January 25, in mostly higher volume. Dow Jones Industrial Average, Russell 2000, NYSE Composite, and Wilshire 5000 Total Market Index closed higher.  Russell 2000 traded in lower volume.

The major indices gapped down at the open and traded lower. They made the day’s lows around 11:00 AM and then turned around and traded higher for the rest of the day.

From Briefing.com:

[…]

Today’s trade looked a lot different at the open compared to where things ended up.

[…]

Sentiment started to shift, however, when buyers showed up fairly quickly after the S&P 500 slipped below its 200-day moving average (3,961).

[…]

The main indices ultimately closed near their best levels of the day, which had the S&P 500 above the 4,000 level and the Dow Jones Industrial Average in positive territory.

[…]

Early on, decliners led advancers by a 4-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq. At the close, advancing issues had the lead over decliners by a slim margin at both the NYSE and the Nasdaq.

Roughly half of the 11 S&P 500 sectors closed with a gain led by financials (+0.7%) thanks to an earnings-driven gain in Capital One (COF 116.09, +9.58, +9.0%). The defensive-oriented utilities sector (-1.3%) was the worst performer and the only sector to move more than 1.0%.

Notably, the Russell 2000 (+0.3%) and S&P Mid Cap 400 (+0.3%) outpaced the three main indices today to close with a modest gain.

  • Nasdaq Composite: +8.1% YTD
  • Russell 2000: +7.3% YTD
  • S&P Midcap 400: +6.5% YTD
  • S&P 500: +4.6% YTD
  • Dow Jones Industrial Average: +1.8% YTD
[…]

Overseas: 

  • Europe: DAX -0.1%, FTSE -0.2%, CAC -0.1%
  • Asia: Nikkei +0.4%, Hang Seng market closed, Shanghai market closed

Commodities: 

  • Crude Oil -0.05 @ 80.18
  • Nat Gas -0.14 @ 2.91
  • Gold +6.50 @ 1942.60
  • Silver +0.18 @ 23.95
  • Copper unch @ 4.25
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