Market Remarks

Morning Notes – Friday, February 3, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM after a big swing following the NFP report; broke below  a descending triangle at 8:30 AM – the 61.8% extension target is near 4120.00, and the 100% extension target is near 4100.00
  • The odds are for a down day with elevated volatility – watch for a break above 4153.25 and a break above 4174.50 for a change of sentiments
  • The major economic data report is due during the day:
    • Non-Farm Employment Change ( 517K vs. 193K est.; prev. 260K) at 8:30 AM
    • Average Hourly Earnings ( 0.3% vs. 0.3% est.; prev. 0.4%) at 8:30 AM
    • Unemployment Rate (3.4% vs. 3.6% est.; prev. 3.5% ) at 8:30 AM
    • Final Services PMI ( 46.6 est.; prev. 46.6) at 9:45 AM
    • ISM Services PMI  ( 50.5 est.; prev. 49.6 ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4130.35, 4113.05, and 4100.02
  • Critical resistance levels for S&P 500 are 4145.40, 4159.17, and 4180.16
  • The key levels for E-mini futures are a break above 4153.25, the low at 6:00 AM, and a break below 4126.00, the low at 3:30 PM on Wednesday

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2023) closed at 4192.25, and the index closed at 4179.76 – a spread of about +15.75 points; the futures closed at 4191.50; the fair value is +0.75
  • Pre-NYSE session open, futures were lower at 8:45 AM, S&P 500 futures were down by -48.00, Dow by -187, and NASDAQ by -223.00

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Hong Kong closed down
  • European markets are mostly lower – Switzerland is up
  • Currencies (Compared to two weeks ago):
Up Down
  • EUR/USD
  • USD/JPY
  • AUD/USD
  • NZD/USD
  • INR/USD
  • Dollar index
  • GBP/USD
  • USD/CHF
  • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are lower
    • Precious metals are mixed
    • Industrial metals are lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.389, down -0.8 basis points from two weeks ago;
    • The 30-year is at 3.545%, down -2.3 basis points;
    • The 2-year yield is at 4.109%, down -3.0 basis points;
    • The 10-Year-&-2-Year spread is at -0.720, up from -0.742
    • The 30-Year-&-10-Year spread is at 0.156, down from 0.171
  • VIX
    • At 18.48 @ 8:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 23.76 on January 3; low = 17.06 on February 2
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on January 27 was a Bullish Engulfing candle following a small red Harami candle breaking above the downtrend line from an all-time high made in the last week of December 2021
    • Stochastic (9,1, 3): %K is above %D;
    • RSI-9 is around 60
  • The week was up +104.01 or +2.7%; the 5-week ATR  is 142.86
  • An up week, third in the last five weeks, and fifth in the previous ten weeks;
  • The weekly pivot point=4037.94, R1=4126.83, R2=4183.09; S1=3981.68, S2=3892.79; R1/R2 pivot levels were breached
  • Above 10-week EMA and 39-week SMA; below 89-week SMA
  • Uptrend Resumed
Daily
  • A relatively small Spinning Top green candle that gapped up after breaking above a resistance level around 4100.00; an uneven Cup-With-Handle pattern – the 100% extension target is around 4375.00 and the 161.8% extension target is near 4750.00
    • Stochastic (9, 1, 3): %K is above%D around 90; potential Bearish Divergence
    • RSI-9 is above 75; above 8-DMA
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • Moving up since 10:00 AM on January 19 making higher lows and higher highs, just below 4180.00, the high of December 13, 2022
    • RSI-21 has drifted to below 60 from above 85 at Noon on Thursday
    • Above EMA20, which is above EMA10 of EMA50 
  • Bias:  Up
30-Minute (E-mini futures)
  • Moving sideways to down since 4:30 PM on Thursday;
    • RSI-21 is moving around just above 50
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving sideways to down since 10:00 PM.
  • The Bollinger Band has been expanding since 7:15 AM with the price sharply moving down to the lower band from the upper band.
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly higher Thursday, February 2, in higher volume. Dow Jones Industrial Average closed down.

The major indices gapped up at the opened lower and traded higher before faltering in the late afternoon and giving up some gains. All but four S&P sectors Consumer Staples, Energy, Materials, and Healthcare – closed higher.

From Briefing.com:

[…]

The Nasdaq Composite (+3.2%) led the upside charge thanks to a huge earnings-driven gain in Meta Platforms (META 188.77, +35.65, +23.3%).

[…]

The Vanguard Mega Cap Growth ETF (MGK) rose 3.2% versus a 1.1% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.5% gain in the S&P 500.

[…]

The communication services sector (+6.7%) held the top spot a wide margin, followed by consumer discretionary (+3.1%) and information technology (+2.8%). The energy sector (-2.5%), meanwhile, was the worst performer as oil prices continued to lose ground ($75.68/bbl, -1.14, -1.5%).

[…]

The 2-yr note yield fell three basis points to 4.08% and the 10-yr note yield was unchanged at 3.40%.

  • Nasdaq Composite: +16.6% YTD
  • Russell 2000: +13.6% YTD
  • S&P Midcap 400: +12.2% YTD
  • S&P 500: +8.9% YTD
  • Dow Jones Industrial Average: +2.7% YTD
[…]
  • Weekly Initial Claims 183K (Briefing.com consensus 201K); Prior 186K; Weekly Continuing Claims 1.655 mln; Prior was revised to 1.666 mln from 1.675 mln
  • […]
  • Q4 Productivity-Prel 3.0% (Briefing.com consensus 2.5%); Prior was revised to 1.4% from 0.8%; Q4 Unit Labor Costs-Prel 1.1% (Briefing.com consensus 1.5%); Prior was revised to 2.0% from 2.4%
  • […]
  • December Factory Orders 1.8% (Briefing.com consensus 2.2%); Prior was revised to -1.9% from -1.8%
[…]

Overseas: 

  • Europe: DAX +2.2%, FTSE +0.8%, CAC +1.3%
  • Asia: Nikkei +0.2%, Hang Seng -0.5%, Shanghai +0.0%

Commodities: 

  • Crude Oil -1.14 @ 75.68
  • Nat Gas -0.05 @ 2.45
  • Gold -10.60 @ 1932.90
  • Silver +0.04 @ 23.67
  • Copper -0.02 @ 4.10
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