Market Remarks

Morning Notes – Thursday February 25, 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 levels around 3910.00 – watch for a break above 3925.75 and break below 3896.50 for clarity
  • Key economic data report due during the day:
    • Prelim GDP ( 4.1% vs. 4.2% est.; prev. 4.0%) at 8:30 AM
    • Core Durable Goods Orders ( 1.4% vs. 0.6% est.; prev. 1.1%) at 8:30 AM
    • Durable Goods Orders ( 3.4% vs. 0.9% est.; prev. 0.5%) at 8:30 AM
    • Prelim GDP Price Index ( 2.1% vs. 2.0% est.; prev. 2.0%) at 8:30 AM
    • Unemployment Claims ( 730K vs. 828K est.; prev. 841K) at 8:30 AM
    • Pending Home Sales ( 0.2% est.; prev. -0.3%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3902.92, 3895.95, and 3859.60
  • Critical resistance levels for S&P 500 are 3916.74, 3928.65, and 3933.61
  • Key levels for E-mini futures: break above 3924.75, the high of 6:00 AM and break below 3896.50, the high of 7:45 AM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2021) closed at 3920.50 and the index closed at 3925.43 – a spread of about -5.00 points; futures closed at 3922.50 for the day; the fair value is -2.00
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -16.50; Dow by -23, and NASDAQ by -129.50

Markets Around The World

  • Markets in the East closed higher
  • European markets are mixed – the UK, France, Spain, and Italy are higher; Germany, STOXX 600, and Switzerland are down
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • 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 1.389%, up 25.6 BP from two weeks ago;
    • 30-years is at 2.242%, up 31.8 BP;
    • 2-years yield is at 0.1280%, up 1.9 BP;
    • The 10-Year-&-2-Year spread is at 1.261, up from 1.024
  • VIX
    • At 22.84 @ 6:45 AM; up from the last close; at/above 5-day SMA;
    • Recent high =  27.01 on February 23; 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 relatively large green candle with small upper and lower shadows; three day Morning Star pattern albeit after a small drop and near the top
  • 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  crossing above %D; above 80; Bullish Divergence
    • RSI-9 above 60; above 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Broke above the downtrend line from the all-time high at 10:00 AM on Wednesday; drifting lower since 2:00 AM
    • RSI-21 turning down from near 65
  • Above EMA20, which at/above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
    • Trending up since 9:30 AM on February 23 but drifting down since 2:30 AM; broke above an uneven – two right & left shoulders – Inverse Head-&-Shoulder pattern, after a short decline, on Wednesday; 61.8% extension target is near 3955.00 and the 100% extension target is near 3990.00; finding resistance near 3930..00
      • RSI-21 drifting down since 1:30 AM
      • At/below EMA10 of EMA50, which is below EMA20
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 2:15 AM;
  • The Bollinger Band is expanding since 2:15 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D lower; around 20;
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, February 24 in lower volume. Indices opened lower but then turned around in the first hour of trading and then moved higher closing near the highs. Dow Jones Industrial Average, Dow Jones Transportation Average, and NYSE Composite closed at all-time highs.

From Briefing.com:

The S&P 500 advanced 1.1% on Wednesday in a strong session, as the market remained influenced by reopening optimism, a buy-the-dip mindset, and Fed Chair Powell. The Russell 2000 gained 2.4%, the Dow Jones Industrial Average gained 1.4% for a record close, and the Nasdaq Composite gained 1.0%. […]

The 10-yr yield finished three basis points higher at 1.39%, and the 2-yr yield finished three basis points higher at 0.13%. The U.S. Dollar Index decreased 0.1% to 90.07. WTI crude futures increased another 2.5%, or $1.56, to $63.24/bbl.

[…]
  • New home sales increased 4.3% m/m to a seasonally adjusted annual rate of 923,000 in January (Briefing.com consensus 855,000) from an upwardly revised 885,000 (from 842,000) in December. On a yr/yr basis, new home sales were up 19.3%.
  • […]
  • The weekly MBA Mortgage Applications Index dropped 11.4% following a 5.1% decline in the prior week.
[…]
  • Russell 2000 +15.7% YTD
  • Nasdaq Composite +5.5% YTD
  • S&P 500 +4.5% YTD
  • Dow Jones Industrial Average +4.4% YTD
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