Morning Notes – Thursday January 28, 2021

/ January 28, 2021

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with high volatility; watch for a break below 3730.25 for change of fortune
  • Key economic data report due during the day:
    • Advanced GDP ( 4.0% vs. 4.2% est.; prev. 33.4%) at 8:30 AM
    • Unemployment Claims ( 847K vs. 880K est.; prev. 914K) at 8:30 AM
    • Good Trade Balance ( -82.5B vs. -83.4B est.; prev, -85.5B) at 8:30 AM
    • Advanced GDP Price Index (2.0% vs. 2.2% est.; prev. 3.5%) at 8:30 AM
    • Prelim Wholesale Inventories ( 0.1% vs. 0.5% est.; prev. 0.0%) at 8:30 AM
    • CB Leading Index (0.3% est.; prev. 0.6%) at 10:00 AM
    • New Home Sales (860K vs. 841K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3752.32, 3705.34, and 3680.49
  • Critical resistance levels for S&P 500 are 3771.42, 3788.17, and 3800.80
  • Key levels for E-mini futures: break above 3792.75, the high of 1:00 PM on Wednesday and break below 3730.25, the low of 8:15 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2021) closed at 3749.00 and the index closed at 3750.77 – a spread of about -1.75 points; futures closed at 3744.25 for the day; the fair value is +4.75
  • Pre-NYSE session open, futures are mixed – at 8:15 AM, S&P 500 futures were up by +20.00; Dow up by +179, and NASDAQ down by -16.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are mixed – Germany, the UK, Switzerland, and STOXX 600 are down; France, Spain, and Itlay are up
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CAD
    • INR/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities (from two weeks ago):
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.031%, down 5.7 BP from two weeks ago;
    • 30-years is at 1.786%, down 3.2 BP;
    • 2-years yield is at 0.117%, down 3.2 BP;
    • The 10-Year-&-2-Year spread is at 0.914, down from 0.939
  • VIX
    • At 32.55 @ 8:00 AM; down from the last close; above 5-day SMA;
    • Recent high =  37.21 on January 27; low =  21.09 on January 21
    • Sentiment: Risk-Off-Neutral

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 22 was a green candle at all-time highs with a small upper shadow and almost no lower shadow;
    • Stochastic (9,1, 3): %K is crossing above %D
    • RSI (9) is above 70
  • The week was up +73.22 or +1.9%; the 5-week ATR is 92.83
  • An up week; third in the last five weeks and sixth in the last ten weeks
  • The weekly week pivot point=3827.76, R1=3875.16, R2=3908.84; S1=3794.08, S2=3746.68; R1/R2 pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A large red candle that gapped down at the open with a small lower shadow and no upper shadow; broke below January 15 low and erased all gains of the month
    • 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 below %D and near 10;
    • RSI-9 is below 40; below 8-day EMA
  • Below 20-day EMA; above 50-day EMA, 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Bouncing up from a support area – a previous congestion area – near 3700.00 to above 3750.
    • RSI-21 rising up above 40 from near 15
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (E-mini futures)
    • Breaking above a Double Bottom pattern with lows near 3706.00 and the mid-point near 3750.00; the 61.8% extension target is near 3775.00 and the 100% extension target is near 3971.00;
      • RSI-21 is near 50 after making a Bullish Divergence at 6:30 PM
      • %K is crisscrossing %D around 90
      • Above EMA10 of EMA50, which is above EMA20
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up since 11:45 PM;
  • The Bollinger Band is expanding slightly since 6:15 AM with price walking up the upper band
    • Stochastic (9, 1, 3): %K is above %D since 8:30 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, January 27 in lower volume. Major indices gapped down at the open and then mostly traded down for rest of the day. Indices made 10+ days lows and gave up most of the gains of the month. All S&P sectors closed down.

From Briefing.com:

The large-cap indices fell more than 2.0% on Wednesday, as risk sentiment was undercut by another day of extreme short squeezes and underwhelming earnings reactions. The S&P 500 (-2.6%) and Dow Jones Industrial Average (-2.1%) gave up their yearly gains in the process. The Nasdaq Composite declined 2.6%, and Russell 2000 declined 1.9%.

[…]

Every sector in the S&P 500 closed sharply lower with losses ranging from 1.4% (energy) to 3.8% (communication services). The CBOE Volatility Index surged 61.6% to 37.21 amid increased interest to hedge against further equity weakness.

[…]

U.S. Treasuries finished with modest gains amid the weak performance in the stock market and were less influenced by the Fed today. The 2-yr yield declined one basis point to 0.12%, and the 10-yr yield declined three basis points to 1.01%. The U.S. Dollar Index rose 0.5% to 90.65. WTI crude futures increased 0.4% to $52.84/bbl amid bullish inventory data.

[…]
  • New orders for durable goods increased 0.2% m/m in December (Briefing.com consensus 0.9%) following an upwardly revised 1.2% increase (from 0.9%) in November. Excluding transportation, orders rose 0.7% m/m (Briefing.com consensus 0.5%) following an upwardly revised 0.8% increase (from 0.4%) in November.
  • […]
  • The MBA Mortgage Applications Index decreased 4.1% following a 1.9% decline in the prior week.
[…]
  • Russell 2000 +6.8% YTD
  • Nasdaq Composite +3.0% YTD
  • S&P 500 -0.1% YTD
  • Dow Jones Industrial Average -1.0% YTD
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