Market Remarks

Morning Notes – Thursday, February 16, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 8:30 AM; declining since 3:00 AM, and broke below a Horizontal channel following the PPI report at 8:30 AM – the 61.8% extension target near 4125.00 is achieved; the 100% extension target is near 4114.00, and the 161.8% extension target is near 4098.00
  • The odds are for a down day with elevated volatility – watch for a break above 4141.50 for a change in sentiments
  • The major economic data report is due during the day:
    • PPI ( 0.7% vs. 0.4% est.; prev. -0.2% ) 8:30 AM
    • Core PPI ( 0.5% vs. 0.3% est.; prev. 0.3%) at 8:30 AM
    • Unemployment Claims ( 194K vs. 200K est.; prev. 196K ) at 8:30 AM
    • Philly Fed Manufacturing PMI ( -24.3 vs. -7.6 est.; prev. -8.9) at 8:30 AM
    • Building Permits ( 1.34M vs. 1.35M est.; 1.34M) at 8:30 AM
    • Housing Starts ( 1.31M vs. 1.35M est.; prev. 1.38M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4117.26, 4103.98, and 4122.47
  • Critical resistance levels for S&P 500 are 4135.87, 4147.72, and 4159.77
  • The key levels for E-mini futures are a break above 4141.50, the low at 2:45 PM on Wednesday, and a break below 4113.00, the low at 10:00 AM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2023) closed at 4158.75, and the index closed at 4147.60 – a spread of about +11.25 points; the futures closed at 4158.25; the fair value is -0.50
  • Pre-NYSE session open, futures were lower – at 8:15 AM, S&P 500 futures were down by -18.75, Dow by -103, and NASDAQ by -65.75

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai closed down
  • European markets are mostly higher – Switzerland is lower
  • 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 lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.809, up +41.2 basis points from two weeks ago;
    • The 30-year is at 3.854%, up +30.7 basis points;
    • The 2-year yield is at 4.618%, up +48.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.809, down from -0.732
    • The 30-Year-&-10-Year spread is at 0.045, down from 0.150
  • VIX
    • At 18.55 @ 6:45 AM; up 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 February 10 was a Spinning Top red Harami candle near a resistance created by the gap-down move of the week of August 22, 2022
    • Stochastic (9,1, 3): %K crossed below the %D;
    • RSI-9 is around 60
  • The week was down -46.02 or 11.1%; the 5-week ATR  is 139.46
  • A down week, second in the last five weeks, and sixth  in the previous ten weeks;
  • The weekly pivot point=4109.26, R1=4157.74, R2=4225.01; S1=4041.99, S2=3993.51; No pivot levels were breached
  • Above 10-week EMA and 39-week SMA; below 89-week SMA
  • Uptrend
Daily
  • A Bullish Engulfing following a Doji-like Harami candle; the high was below the previous day’s high, and the low was above the previous day’s low
    • Stochastic (9, 1, 3): %K is above %D;
    • RSI-9 is just  above 60; above 8-DMA
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • The uptrend since January 19, with higher highs and higher lows, was tested on February 10, when the futures came close to the last higher low of 4048.50; a symmetrical triangle is emerging with the price near the lower bound; almost unchanged since 4:00 Pm on February 1
    • RSI-21 has dropped to just above 40
    • At/below EMA20, but above EMA10 of EMA50
  • Bias:  Up-Side
30-Minute (E-mini futures)
  • Effectively unchanged from 2:00 PM on February 13, following large swings between 4185.00 and 4100.00 on Tuesday;
    • RSI-21 has declined to 40
    • Below EMA10 of EMA50, which is below EMA20
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been drifting lower since 1:30 AM
  • The Bollinger Band has been expanding since 4:15 AM, with the price walking down the lower band
  • Bias: Down

Previous Session

Major U.S. indices closed mostly higher on Wednesday, February 15, in lower volume. NYSE Composite closed lower. The major indices opened lower but turned around and slowly drifted higher for the rest of the day. Major indices have been moving sideways for the past few days. NASDAQ Composite, Dow Jones Transportation Average, and Russell 200 led the market higher.

From Briefing.com:

[…]

The 10-yr note yield rose five basis points to 3.81%, initially fueling worries about valuation constraints and competition for stocks.

[…]

Alphabet and Tesla helped to propel their respective S&P 500 sectors — communication services (+1.2%) and consumer discretionary (+1.2%) — to first place on the leaderboard today. Meanwhile, the health care (-0.5%) and energy (-1.8%) sectors were alone in negative territory by the close.

[…]

Notably, small cap stocks performed better than their larger peers today. The Russell 2000 (+1.1%) logged the biggest gain among the major indices.

  • Nasdaq Composite: +15.3% YTD
  • Russell 2000: +11.3% YTD
  • S&P Midcap 400: +10.6% YTD
  • S&P 500: +8.0% YTD
  • Dow Jones Industrial Average: +3.0% YTD
[…]
  • Weekly MBA Mortgage Applications Index -7.7%; Prior -7.4%
  • January Retail Sales 3.0% (Briefing.com consensus 1.7%); Prior -1.1%; January Retail Sales ex-auto 2.3% (Briefing.com consensus 0.8%); Prior was revised to -0.9% from -1.1%
  • […]
  • February Empire State Manufacturing -5.8 (Briefing.com consensus -19.0); Prior -32.9
  • January Industrial Production 0.0% (Briefing.com consensus 0.5%); Prior was revised to -1.0% from -0.7%; January Capacity Utilization 78.3% (Briefing.com consensus 79.1%); Prior was revised to 78.4% from 78.8%
  • […]
  • December Business Inventories 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.4%
  • February NAHB Housing Market Index 42 (Briefing.com consensus 37); Prior 35
[…]

Overseas: 

  • Europe: DAX +0.8%, FTSE +0.6%, CAC +1.2%
  • Asia: Nikkei -0.4%, Hang Seng -1.4%, Shanghai -0.4%

Commodities: 

  • Crude Oil -0.55 @ 78.56
  • Nat Gas -0.12 @ 2.45
  • Gold -20.60 @ 1845.50
  • Silver -0.29 @ 21.61
  • Copper -0.07 @ 4.02
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