Market Remarks

Morning Notes – Thursday February 4, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideways to an up day – watch for a break above 3843.50 and break below 3811.25 for clarity
  • Key economic data report due during the day:
    • Unemployment Claims ( 779K vs. 828K est.; prev. 812K) at 8:30 AM
    • Prelim Nonforam Productivity ( -4.8% vs. -2.9% est.; prev. 4.6% ) at 8:30 AM
    • Prelim Labor Unit Cost ( 6.8% vs. 4.1% est.; prev. -6.6%) at 8:30 AM
    • Factory Orders ( 0.7% est.; prev. 1.0%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3816.68, 3813.07, and 3791.84
  • Critical resistance levels for S&P 500 are 3839.23, 3848.05, and 3862.28
  • Key levels for E-mini futures: break above 3840.00, the high of 2:30 PM on Wednesday and break below 3811.25, the low of 12:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2021) closed at 3822.00 and the index closed at 3830.17 – a spread of about -8.25 points; futures closed at 3823.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +8.25; Dow by +23, and NASDAQ by +63.25

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai was up
  • European markets are mostly higher – the UK and Spain are lower
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are higher
    • Precious metals are mixed
    • Industrial metals are mostly higher
    • Most soft commodities are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.131%, up 4.1 BP from two weeks ago;
    • 30-years is at 1.912%, up 7.0 BP;
    • 2-years yield is at 0.117%, down 2.8 BP;
    • The 10-Year-&-2-Year spread is at 1.014, up from 0.945
  • VIX
    • At 22.71 @ 8:15 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-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 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 relatively small; red spinning top candle with small lower and upper shadows
  • 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)
  • Moving sideways since 12:00 PM on Tuesday around 3830.00
    • RSI-21 is trending down; declined from above 80 to just above 50
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
    • Moving sideways since 11:30 AM on Tuesday just above a resistance level near 3823.50; next resistance is near 3860.00
      • RSI-21 is moving around 50
      • At/below EMA20, which is at/above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 1:45 PM on Tuesday;
  • The Bollinger Band is narrowing since 6:30 AM
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, February 3 in mixed volume. NASDAQ Composite closed down and Dow Jones Transport Averages and Russell 200 traded in higher volume. Major indices mostly small indecisive candlestick formations.

From Briefing.com:

The stock market finished relatively unchanged on Wednesday, even though Alphabet (GOOG 2070.07, +142.50, +7.4%) and Amazon (AMZN 3312.53, -67.47, -2.0%) reported exceptional earnings results. The S&P 500 (+0.1%), Nasdaq Composite (unch), and Dow Jones Industrial Average (+0.1%) closed little changed, while the Russell 2000 gained 0.4%. […]

The S&P 500 communication services sector climbed 2.1%, largely due to Alphabet’s influence and a trickle-down effect on other ad-based companies. The energy sector advanced the most with a 4.3% gain amid a lingering reopening optimism. Crude futures ($55.70, +0.93, +1.7%) settled above $55.00/bbl.

The consumer discretionary (-0.8%), health care (-0.7%), real estate (-0.4%), and information technology (-0.3%) sectors were on the losing end of the action.

[…]

The 10-yr yield increased three basis points to 1.13%, and the 2-yr yield was flat at 0.11%. The U.S. Dollar Index decreased 0.1% to 91.13. The CBOE Volatility Index dropped 10.4% to 22.91 amid decreased hedging interest.

[…]
  • The ISM Non-Manufacturing Index rose to 58.7% in January (Briefing.com consensus 57.0%) from an upwardly revised 57.7% (from 57.2%) in December. The dividing line between expansion and contraction is 50.0%. The January reading is the highest since February 2019 and reflects a pickup in the pace of expansion from December.
  • […]
  • The ADP Employment Change report estimated that 174,000 jobs were added to private-sector payrolls in January (Briefing.com consensus +55,000) following an upwardly revised 78,000 decline (from -123,000) in December.
  • The IHS Markit Services PMI for January was revised higher to 58.3 from 57.5 in the preliminary reading.
[…]
  • Russell 2000 +9.4% YTD
  • Nasdaq Composite +5.6% YTD
  • S&P 500 +2.0% YTD
  • Dow Jones Industrial Average +0.4% YTD
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