Market Remarks

Morning Notes – Friday January 22, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day, with a good chance of sideways to up move from the pre-open level near 3815.00; watch for a break above 3831.25
  • Key economic data report due during the day:
    • Flash Manufacturing PMI ( 56.6 est.; prev. 57.1) at 9:45 AM
    • Flash Services PMI (53.3 est.; prev. 54.8) at 9:45 AM
    • Existing Home Sales ( 6.55M est.; prev. 6.69M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3834.45, 3816.22, and 3804.53
  • Critical resistance levels for S&P 500 are 3845.05, 3852.34, and 3861.22
  • Key levels for E-mini futures: break above 3831.25, the high of 4:00 AM and break below 3808.25, the high of 6:00 AM on Wednesday

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2021) closed at 3846.25 and the index closed at 3853.07 – a spread of about -6.75 points; futures closed at 3846.00 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are lower – at 7:45 AM, S&P 500 futures were down by -30.00; Dow by -263, and NASDAQ by -86.00

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • NZD/USD
    • GBP/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are lower
    • Precious metals are higher
    • Industrial metals are mostly lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.109%, up 3.8 BP from two weeks ago;
    • 30-years is at 1.872%, up 2.7 BP;
    • 2-years yield is at 0.129%, down 1.2 BP;
    • The 10-Year-&-2-Year spread is at 0.980, up from 0.930
  • VIX
    • At 23.34 @ 6:30 AM; up from the last close; above 5-day SMA;
    • Recent high =  29.19 on January 4; low =  20.99 on December 29
    • Sentiment: Risk-Off

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

Monthly
  • Confirmed Uptrend
  • December 2020 was a green candle with a small gap and with almost no upper and lower shadows; all-time closing and intraday highs;
    • Stochastic %K above %D near 100;
    • RSI-9 above 70; broke above a downtrend line from January 2018
    • Above the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on January 8 was a green candle with a relatively long lower shadow that opened higher; all-time intraday highs;
    • Stochastic (9,1, 3): %K is above %D; near 100
    • RSI (9) is above 70
  • The week was up +68.61 or +1.8%; the 5-week ATR is 91.15
  • An up week; third in the last five weeks and seventh in the last ten weeks
  • The weekly week pivot point=3771.36, R1=3880.01, R2=3935.34; S1=3716.03, S2=3607.38; R1/R2/3 and S1/S2/S3 pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A small Doji type candle with small upper and lower shadows, equal to the real body; breaking above a trading range since January 7;
    • Broke above a symmetrical triangle at 3550.00 level on November 9; the 61.8% extension target near 3750.00 is achieved; 100% extension target is near 3900.00
    • %K  is above %D and near 100;
    • RSI-9 is near 70; above 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Drifting below since 12:00 on January 21 AM from the all-time high of 3859.00 to near 3815.00;
    • RSI-21 declined from near 85 to below 25
  • Below EMA20, at/below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving down since 12:00 AM on Thursday
  • RSI-21 declining since 2:30 PM on Wednesday; Bearish Divergence
    • %K is crisscrossing %D lower
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 3:45 AM on Thursday;
  • The Bollinger Band is expanding slightly since 2:30 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D higher since 6:00 AM
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Thursday, January 21 in mixed volume. S&P 500 and NASDAQ Composite closed higher. Dow Jone Industrial Average and Dow Jones Transportation Average traded in higher volume. Most indices made small candles and are maintaining the break above a small trading range that was in effect since January 7. Major indices are near all-time highs.

From Briefing.com:

The Nasdaq Composite (+0.6%) and S&P 500 (+0.03%) closed at new record highs on Thursday, largely due to continued strength in several mega-cap stocks that disproportionately benefited the Nasdaq. The Dow Jones Industrial Average (-0.04%) finished on the negative side of its flat line, and the Russell 2000 declined 0.9%.

[…]

These household names propped up the S&P 500 information technology (+1.3%), consumer discretionary (+0.6%), and communication services (+0.3%) sectors. Semiconductor, homebuilding, and retail stocks also contributed to their positive performances. 

These were the only S&P sectors that closed higher, though. The energy sector (-3.4%) succumbed to profit-taking interest that trimmed its monthly gain to 11.5%. The materials (-1.5%), financials (-1.1%), and industrials (-0.8%) sectors also finished as laggards.

[…]

Longer-dated U.S. Treasuries finished on a lower note. The 2-yr yield was flat at 0.12%, and the 10-yr yield increased two basis points to 1.11%. The U.S. Dollar Index declined 0.4% to 90.08. WTI crude futures declined 0.3%, or $0.16, to $53.12/bbl.

[…]
  • Initial claims for the week ending January 16 declined by 26,000 to 900,000 (Briefing.com consensus 845,000). Continuing claims for the week ending January 9 decreased by 127,000 to 5.054 million.
  • […]
  • Housing starts increased 5.8% m/m in December to a seasonally adjusted annual rate of 1.669 million (Briefing.com consensus 1.560 million). That was the strongest pace of starts since September 2006. Building permits rose 4.5% m/m to 1.709 million (Briefing.com consensus 1.600 million), which was the strongest pace since August 2006.
  • […]
  • The Philadelphia Fed Index jumped to 26.5 in January (Briefing.com consensus 12.0) from an upwardly revised 9.1 in December (from 8.5).
[….]
  • Russell 2000 +8.4% YTD
  • Nasdaq Composite +5.0% YTD
  • S&P 500 +2.6% YTD
  • Dow Jones Industrial Average +1.9% YTD
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