Morning Notes – Wednesday February 3, 2021

/ February 3, 2021

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up to sideways day – watch for a break above 3843.50 and break below 3813.75 for clarity
  • Key economic data report due during the day:
    • ADP Non-Farm Employment Change ( 174K vs. 48K est.; prev. -78K) at 8:15 AM
    • Final Services PMI ( 57.4 est.; prev. 57.5) at 8:30 AM
    • ISM Services PMI ( 56.7 est.; prev. 57.2) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3826.23, 3813.07, and 3791.84
  • Critical resistance levels for S&P 500 are 3842.28, 3848.05, and 3871.66
  • Key levels for E-mini futures: break above 3843.50, the high of 3:00 AM and break below 3825.00, the low of 9:00 PM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (March 2021) closed at 3818.50 and the index closed at 3826.31 – a spread of about -7.75 points; futures closed at 3818.25 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are mixed – at 8:00 AM, S&P 500 futures were up by +10.50; Dow is down by -15, and NASDAQ is up by +81.00

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai closed down
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities (from two weeks ago):
    • Energy futures are higher
    • Precious metals are mixed
    • Industrial metals are mostly lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.105%, up 1.3 BP from two weeks ago;
    • 30-years is at 1.877%, up 3.7 BP;
    • 2-years yield is at 0.113%, down 2.8 BP;
    • The 10-Year-&-2-Year spread is at 0.992, up from 0.951
  • VIX
    • At 24.47 @ 6:45 AM; down from the last close; below 5-day SMA;
    • Recent high =  37.51 on January 29; low =  21.09 on January 21
    • Sentiment: Risk-On

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 29 was a large Bearish Engulfing candle from all-time highs with small upper and almost lower shadows;
    • Stochastic (9,1, 3): %K is below %D; below 50
    • RSI (9) is near 55 after making Bearish Divergence
  • The week was down -127.23 or -3.3%; the 5-week ATR is 113.23
  • A down week; second in the last five weeks and fourth in the last ten weeks
  • The weekly week pivot point=3759.75, R1=3825.39, R2=3936.53; S1=3648.61, S2=3583.97; S1/S2/S3 pivot levels were breached
  • At/below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A green Harami candle that gapped up at the open; almost no lower shadow and an upper shadow equal to half of the real body
  • 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; above 70;
    • RSI-9 is above 50; above 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Continuing the bounce from a swing low – 3652.50, the low of January 4 – to near 3845.00; broke above a downtrend line from the all-time high
    • RSI-21 has declined from above 80 to just above 60
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
    • Trending up since 6:00 PM on Sunday; broke above a resistance level near 3823.50; next resistance is near 3860.00
      • RSI-21 declined to just above 50 from above 75; Bearish Divergence at 3:00 AM
      • %K is crisscrossing %D around 20
      • At/below EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 1:45 PM on Tuesday;
  • The Bollinger Band is narrow and stable since 4:30 PM
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Tuesday, February 2 in mostly lower volume. Dow Jones Transport Averages traded in higher volume. Major indices opened higher and then mostly traded up for rest of the day. They broke above the highs of Monday’s Bearish Engulfing candles. All but one S&P sectors closed up. Telecom closed down.

From Briefing.com:

The S&P 500 gained 1.4% on Tuesday in a broad-based advance, bringing its two-day gain to 3.0%. The Dow Jones Industrial Average (+1.6%) and Nasdaq Composite (+1.6%) edged out the benchmark index in terms of performance, while the Russell 2000 gained 1.2%.

All 11 S&P 500 sectors contributed to the advance, including the financials (+2.5%), industrials (+2.2%), and consumer discretionary (+2.0%) sectors with at least 2.0% gains. The health care (+0.3%) and real estate (+0.4%) sectors lagged with more modest gains.

[…]

Longer-dated U.S. Treasuries succumbed to selling pressure amid the positive outing in stocks and renewed growth optimism. The 10-yr yield increased three basis points to 1.11%, and the 2-yr yield remained unchanged at 0.11%. The U.S. Dollar Index increased 0.1% to 91.07. WTI crude futures rose 2.3%, or $1.21, to $54.77/bbl.

[…]
  • Russell 2000 +8.9% YTD
  • Nasdaq Composite +5.6% YTD
  • S&P 500 +1.9% YTD
  • Dow Jones Industrial Average +0.3% YTD
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