Market Remarks

Morning Notes – Tuesday February 23, 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 move from pre-open levels – watch for a break above 3868.25 for a change of fortunes
  • Key economic data report due during the day:
    • HPI ( 1.1% vs. 1.0% est.; prev. 1.0%) at 9:00 AM
    • S&P/CS Composite-20 HPI ( 10.1% vs. 9.9% est.; prev. 9.2%) at 9:00 AM
    • CB Consumer Confidence ( 90.2 est.; prev. 89.3) at 10:00 AM
    • Richmond Manufacturing Index ( 15 est.; prev. 14 ) at 10:00 AM
    • Fed Chair Powell’s Testimony

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3843.09, 3830.11, and 3816.68
  • Critical resistance levels for S&P 500 are 3874.71, 3886.89, and 3902.92
  • Key levels for E-mini futures: break above 3868.50, the low of 7:00 PM and break below 3840.50, the low of 5:30 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (March 2021) closed at 3874.50 and the index closed at 3876.50 – a spread of about -2.00 points; futures closed at 3873.50 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -22.25; Dow by -14, and NASDAQ by -241.25

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Seoul closed down; Tokyo was closed
  • European markets are mostly lower – France and Spain are higher
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are higher
    • Most soft commodities are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.364%, up 20.4 BP from two weeks ago;
    • 30-years is at 2.187%, up 24.9 BP;
    • 2-years yield is at 0.113%, up 0.4 BP;
    • The 10-Year-&-2-Year spread is at 1.254, up from 1.051
  • VIX
    • At 24.89 @ 7:00 AM; up from the last close; above 5-day SMA;
    • Recent high =  37.51 on January 29; low =  19.69 on February 10
    • 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 February 19 was a Dark Cloud Cover candle from the all-time highs with small upper and lower shadows;
    • Stochastic (9,1, 3): %K is turning below %D from near 100
    • RSI (9) is turning down from near 70
  • The week was down -28.12 or -0.7%; the 5-week ATR is 113.60
  • A down week; second in the last five weeks and fourth in the last ten weeks
  • The weekly week pivot point=3914.06, R1=3943.08, R2=3979.46; S1=3877.68, S2=3848.66; S1 pivot level was breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23, 2020
Daily
  • A small red candle with small upper and lower shadows
  • Broke above a symmetrical triangle at 3550.00 level on November 9; the 100% extension target near 3900.00 is achieved; 161.8% extension target is near 4140.00 levels
    • %K  is below %D; near 0;
    • RSI-9 crossed below 50; below 8-day EMA
  • At/above 20-day EMA; above 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Crossed below a support level around 3878.50, which is also a neckline of an uneven Head-&-Shoulder pattern – the 61.8% extension target is near 3838.00 and the 100% extension target is near 3798.00
    • RSI-21 is below 35 and is zig-zagging lower
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (E-mini futures)
    • Trending lower since 11:00 PM on February 15
      • RSI-21 rising from near 30; below 40; potential Bullish Divergence
      • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 3:00 AM;
  • The Bollinger Band is expanding with price mostly walking down the lower band
    • Stochastic (9, 1, 3): %K is below %D around 20;
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mostly lower on Monday, February 22 in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average closed higher. S&P 500 and Russell 2000 traded in lower volume. Indices are near all-time highs and made small candlestick formations. Indices opened lower and then traded down and mostly closed in the lower half of the day’s trading. Markets are near all-time highs.

From Briefing.com:

The S&P 500 lost 0.8% on Monday for its fifth straight decline, as weakness in the growth stocks outweighed relative strength in the value/cyclical stocks. The Nasdaq Composite dropped 2.5%, and the Russell 2000 declined 0.7%. The Dow Jones Industrial Average (+0.1%), however, eked out a gain. […]

Those were typically found in the Nasdaq, the S&P 500 information technology (-2.3%) and consumer discretionary (-2.2%) sectors, and the Philadelphia Semiconductor Index (-3.8%).

[…]

The 10-yr yield finished the session one basis point higher at 1.36%. The 2-yr yield remained flat at 0.11%. The U.S. Dollar Index decreased 0.3% to 90.12.

Interestingly, six of the 11 S&P 500 sectors still closed in positive territory, and the iShares Russell 1000 Value ETF (IWD 145.57, +0.57, +0.4%) closed at a record high.

[…]

The S&P 500 financials sector advanced 1.0%, but the energy sector (+3.5%) noticeably outperformed with a 3.5% gain amid sharply higher oil prices ($61.63, +2.63, +4.5%).

[…]
  • The Conference Board’s Leading Economic Index (LEI) increased 0.5% m/m in January (Briefing.com consensus 0.4%) following an upwardly revised 0.4% increase (from 0.3%) in December. January marked the ninth consecutive monthly increase.
[…]
  • Russell 2000 +14.0% YTD
  • Nasdaq Composite +5.0% YTD
  • S&P 500 +3.2% YTD
  • Dow Jones Industrial Average +3.0% YTD
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