Market Remarks

Morning Notes – Tuesday July 20, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility and with a good chance of a sideways to down move from the pre-open levels around 4275.00 levels — watch for a break below 4255.00 for a change of sentiments
  • Key economic data report due during the day:
    • Building Permits ( 1.60M vs. 1.69M est.; prev. 1.68M) at 8:30 AM
    • Housing Starts ( 1.64M vs. 1.59M est.; prev. 1.54M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4258.64, 4235.59, and 4212.77
  • Critical resistance levels for S&P 500 are 4296.40, 4305.39, and 4322.53
  • Key levels for E-mini futures: break above 4279.25, the high of 3:30 AM and break below 4255.00, the low of 12:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (September 2021) closed at 4255.00 and the index closed at 4258.49 – a spread of about -3.50 points; futures closed at 4251.25 for the day; the fair value is +3.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +21.00; Dow by +212, and NASDAQ by +59.00

Markets Around The World

  • Markets in the East closed lower
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are lower
    • Precious metals are mixed
    • Industrial metals are lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.181%, down -18.9 basis points from two weeks ago;
    • 30-years is at 1.815%, down -18.9 basis points;
    • 2-years yield is at 0.218%, down -0.2 basis points;
    • The 10-Year-&-2-Year spread is at 0.963, down from 1.150
  • VIX
    • At 21.54 @ 7:45 AM; down from the last close; above 5-day SMA;
    • Recent high =  25.09 on July 19; low =  15.94 on July 13
    • Sentiment: Risk-Neutral-On

The trend and patterns on various time frames for S&P 500:

Monthly
  • Confirmed Uptrend
  • May 2021 was a Doji with a small upper shadow and a long lower shadow; at all-time closing and intra-month highs;
    • Stochastic %K above %D near 100;
    • RSI-9 near 80; 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
Weekly:
  • The week ending on July 16 was a Bearish Engulfing with almost no lower shadow
    • Stochastic (9,1, 3): %K crossed below %D; near 90
    • RSI (9) is just turned below 70
  • The week was down – 42.39 or -1.0%; the 5-week ATR is 89.31
  • A down week; second in the last five weeks, and fourth in the last ten weeks
  • The weekly pivot point=4347.79, R1=4373.05, R2=4418.94; S1=4301.90, S2=4276.64; No pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23, 2020
Daily
  • A relatively large red candle that gapped down at the open and did not fill the gap; almost no upper shadow and a lower shadow equal to half of the real-body
    • %K is below %D; below 20
    • RSI-9 is broke below 40; below 8-day EMA
  • Below 20-day EMA; at/above 50-day EMA; above 100-day, and 200-day SMA
  • Uptrend
2-Hour (E-mini futures)
  • Moving down since 8:00 AM on July 14 from all-time highs; broke a sequence of higher highs and higher lows; bouncing since 2:00 PM on July 19 from a low of 4224.00 to near 4270.00
    • RSI-21 bouncing up from near 10 and after making a minor Bullish Divergence to above 50
    • Below EMA 20, which is below EMA10 of EMA50,
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down since 9:30 AM on July 14; bouncing up since 2:30 PM on Monday to 38.2% Fibonacci retracement level
    • RSI-21 is moving along 50
    • At/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 since 9:00 PM
  • The Bollinger Band is contracting since 6:30 AM
    • Stochastic (9, 1, 3): %K crossed below  %D at 7:45 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday, July 19 in higher volume. The market gapped down at the open and then traded down for most of the day before bouncing up a bit in the last half hour of the session.

From Briefing.com:

The stock market declined sharply on Monday with index losses ranging between 1.1% (Nasdaq Composite) and 2.1% (Dow Jones Industrial Average), as risk sentiment remained pressured by growth concerns. The Russell 2000 (-1.5%) entered correction territory, which is typically defined as a 10% decline from a recent high.

There was a relatively encouraging finish, though, that helped the S&P 500 (-1.6%) close above its 50-day moving average (4240) after falling below it during the session.

Still, the losses were spread across all 11 S&P 500 sectors and all 30 Dow components. The energy (-3.6%) and financials (-2.8%) sectors took the brunt of the damage and extended recent losses while the consumer staples sector (-0.3%) declined just 0.3%. Declining issues outpaced advancing issues by a 7:1 margin at the NYSE.

[…]

The Treasury market remained a signpost for growth concerns, as the 10-yr yield dropped 12 basis points to 1.18%.

In addition, WTI crude futures dropped 7.4%, or $5.34, to $66.42/bbl, as investors factored in expectations for weaker demand with a confirmation from OPEC+ that it will increase production, starting next month. The 2-yr yield decreased two basis points to 0.21%. The U.S. Dollar Index increased 0.2% to 92.84.

[…]

Monday’s economic data was limited to the NAHB Housing Market Index for July, which decreased to 80 (Briefing.com consensus 82) from 81 in June. Looking ahead, investors will receive Housing Starts and Building Permits for June on Tuesday.

  • S&P 500 +13.4% YTD
  • Dow Jones Industrial Average +11.0% YTD
  • Nasdaq Composite +10.8% YTD
  • Russell 2000 +7.9% YTD

Overseas: 

  • Europe: DAX -2.6%, FTSE -2.3%, CAC -2.5%
  • Asia: Nikkei -1.3%, Hang Seng -2.2%, Shanghai flat

Commodities: 

  • Crude Oil -5.43 @ 66.22
  • Nat Gas +0.10 @ 3.78
  • Gold -5.50 @ 1809.20
  • Silver -0.63 @ 25.14
  • Copper -0.13 @ 4.19
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