Market Remarks

Morning Notes – Friday, January 7, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; sharply down following the Non-Farm Payroll report at 8:30 AM
  • The odds are for a down day with elevated volatility; watch for a break above 4701.25 for a change of sentiments
  • Key economic data report due during the day:
    • Non-Farm Employment Change ( 199K vs. 426K est.; prev. 249K) at 8:30 AM
    • Average Hourly Earnings ( 0.6% vs. 0.4% est.; prev. 0.4%) at at 8:30 AM
    • Unemployment Claims ( 3.9% vs. 4.1% est.; prev. 4.2%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4688.41, 4671.26, and 4631.97
  • Critical resistance levels for S&P 500 are 4718.65, 4725.01, and 4739.48
  • Key levels for E-mini futures: break above 4701.25, the high of 8:30 AM and break below 4662.00, the low of 10:00 AM on Thursday

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2022) closed at 4687.00 and the index closed at 4696.05 – a spread of about -9.00 points; futures closed at 4687.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -14.00; Dow Down by -65; and NASDAQ by -108.00

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Tokyo closed down
  • European markets are mixed – the UK, Italy, and Switzerland are higher; German7, France, Spain, and STOXX 600 are lower
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • EUR/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.739%, up +24.6 basis points from two weeks ago;
    • 30-years is at 2.098%, up +19.3 basis points;
    • 2-years yield is at 0.8700%, up +17.9 basis points;
    • The 10-Year-&-2-Year spread is at 0.869, up from 0.802
    • The 30-Year-&-10-Year spread is at 0.359, down from 0.412
  • VIX
    • At 20.29 @ 8:45 AM; up from the last close; above 5-day SMA;
    • Recent high = 27.39 on December 20; low =  16.34 on January 4
    • Sentiment: Risk-Off

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

Monthly
  • December 2021 was a green candle that opened above the previous week’s real-body and closed higher with a small upper shadow and a slightly longer lower shadow; at all-time highs
    • Stochastic (9, 1, 3): %K crossed above %D; above 90;
    • RSI-9 is turning up from above 75;
    • Above the upper band of a 120-month regression channel;
  • Confirmed Uptrend: sequence of higher highs and higher lows
Weekly:
  • The week ending on December 31 was a small green candle like a tear-drop
    • Stochastic (9,1, 3): %K is turning down above %D; near 80
    • RSI-9 is just above 65
  • The week was up +40.39 or +0.9%; the 5-week ATR  is 155.50
  • An up week; third in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4769.70, R1=4805.41, R2=4844.64; S1=4730.47, S2=4694.76; R1 pivot level was breached
  • Above 10-week EMA; above 39-week SMA; above 89-week SMA
  • Uptrend Resumed
Daily
  • A Doji candle that closed below the previous day’s close
    • Stochastic (9, 1, 3): %K is below %D; turning up from near 0;
    • RSI-9 is just below 60 after falling to near 45 from above 60; below 8-day EMA;
  • Below 20-day EMA; above 50-day EMA, 100-day SMA, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Moving sideways after a sharp decline from the all-time high of 4808.25 to 4662.00; broke below a Horizontal Channel – between 4798.00 and 4750.00 – the 161.8% extension target near 4678.00 is achieved
    • RSI-21 is trending down since 2:00 PM on December 27; below a downtrend line; made few Bearish Divergences
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sideways since 4:00 PM on January 5;
    • RSI-21 is moving around 50;
    • At/below EMA20, which is at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 9:30 PM on Wednesday
  • The Bollinger Band is narrow and stable at 8:15 AM;
    • Stochastic (9, 1, 3): %K is crossing above %D at 8:15 AM from below 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mixed on Thursday, January 6, in lower volume. The day’s price action was highly volatile with large swings.

From Briefing.com:

The stock market closed mixed on Thursday in an underwhelming effort following yesterday’s retreat. The S&P 500 and Nasdaq Composite both declined 0.1%, and the Dow Jones Industrial Average declined 0.5%. The small-cap Russell 2000, however, advanced 0.6%. […]

Five of the 11 S&P 500 sectors ended the session in positive territory while six sectors closed lower. The materials (-1.2%), health care (-1.2%), and utilities (-1.1%) sectors declined more than 1.0% while the information technology sector declined 0.5%.

[…]

Recapping the moves in the Treasury market, the 10-yr yield settled three basis points higher at 1.73% while the 2-yr yield rose six basis points to 0.88% amid expectations for a more aggressive Fed. The U.S. Dollar Index increased 0.1% to 96.30. WTI crude futures rose 2.0%, or $1.58, to $79.40/bbl after briefly topping $80.00/bbl.

[…]
  • Initial claims for the week ending January 1 increased by 7,000 to 207,000 (Briefing.com consensus 198,000) and continuing claims for the week ending December 25 increased by 36,000 to 1.754 million.
  • […]
  • The ISM Non-Manufacturing Index for December decreased to 62.0% (Briefing.com consensus 67.1%) from a record high 69.1% in November. The dividing line between expansion and contraction is 50.0%. The December reading marks the 19th straight month of growth for the services sector.
  • […]
  • The trade deficit for November widened to $80.2 billion (Briefing.com consensus -$69.4 billion) from $67.2 billion in October. Exports were $0.4 billion higher than October exports and imports were $13.4 billion more than October imports.
  • […]
  • Factory orders for manufactured goods increased 1.6% m/m in November (Briefing.com consensus 1.2%) following an upwardly revised 1.2% increase (from 1.0%) in October. Shipments of manufactured goods jumped 0.7% after increasing 2.0% in October.
[…]
  • Dow Jones Industrial Average -0.3% YTD
  • S&P 500 -1.5% YTD
  • Russell 2000 -1.7% YTD
  • Nasdaq Composite -3.6% YTD

Overseas: 

  • Europe: DAX -1.4%, FTSE -0.9%, CAC -1.7%
  • Asia: Nikkei -2.9%, Hang Seng +0.7%, Shanghai -0.3%

Commodities: 

  • Crude Oil +1.83 @ 79.45
  • Nat Gas flat @ 3.69
  • Gold -30.20 @ 1787.00
  • Silver -0.86 @ 22.12
  • Copper -0.04 @ 4.36
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