Market Remarks

Morning Notes – Thursday, January 13, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:30 AM; futures have risen to the upper bound around 4726.00 of a trading range since 12:45 PM on Wednesday  after testing its lows around 4702.00
  • The odds are for an up day with elevated volatility; watch for a break below 4714.75 for a change of sentiments
  • Key economic data report due during the day:
    • PPI (0.2% vs. 0.4% est.; prev. 0.8%) at 8:30 AM
    • Core PPI ( 0.5% vs. 0.5% est.; prev. 0.7%) at 8:30 AM
    • Unemployment Claims ( 230K vs. 119K est; prev. 207K) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4718.39, 4706,71, and 4694.87
  • Critical resistance levels for S&P 500 are 4748.83, 4758.17, and 4774.27
  • Key levels for E-mini futures: break above 4726.25, the high of 12:45 PM on Wednesday and break below 4714.75, the low of 6:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2022) closed at 4718.50 and the index closed at 4726.35 – a spread of about -7.75 points; futures closed at 4716.25 for the day; the fair value is +1.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +4.25; Dow by +62; and NASDAQ by +19.50

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, and Seoul closed lower; Hong Kong, Sydney, Mumbai, and Singapore closed higher
  • European markets are mixed – Germany, the UK, Spain, and Itlay are higher; France, STOXX 600, and Switzerland are down
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.725%, up +18.2 basis points from two weeks ago;
    • 30-years is at 2.074%, up +12.1 basis points;
    • 2-years yield is at 0.915%, up +16.5 basis points;
    • The 10-Year-&-2-Year spread is at 0.810, up from 0.793
    • The 30-Year-&-10-Year spread is at 0.349, down from 0.410
  • VIX
    • At 17.88 @ 8:00 AM; up from the last close; below 5-day SMA;
    • Recent high = 23.33 on January 10; low =  16.34 on January 4
    • Sentiment: Risk-On

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 January 7 was a relatively large Bearish Engulfing candle at all-time highs
    • Stochastic (9,1, 3): %K crossed below %D;
    • RSI-9 is turned down below 60
  • The week was down -89.15 or -1.9%; the 5-week ATR  is 151.11
  • A down week; second in the last five weeks, and fifth in the previous ten weeks
  • The weekly pivot point=4719.46, R1=4776.19, R2=4875.34; S1=4620.31, S2=4563.58; R1/S1/S2 pivot levels were breached
  • Above 10-week EMA; above 39-week SMA; above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A small Doji candle following a three-day Morning Star pattern following a shallow decline
    • Stochastic (9, 1, 3): %K is above %D; above 50;
    • RSI-9 is just above 50; below 8-day EMA;
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Moving sideways just above a downtrend line from the all-time high after bouncing up almost 150 points from a low of 4572.75 on Monday
    • RSI-21 is around 60
  • Above EMA20, which at/above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sideways to up since 3:30 PM on January 11
    • RSI-21 is moving around 50 ;
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up since 4:15 PM on January 11
  • The Bollinger Band is narrowing slightly since 7:45 AM
    • Stochastic (9, 1, 3): %K is crossing above %D at 8:15 AM
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, January 12, in mixed volume. Russell 2000 and Dow Jones Transportation Average closed lower in lower volume. Dow Jones Industrial Average also traded in lower volume. The major indices opened higher, moved higher, then went into negative before moving sideways for the rest of the day.

From Briefing.com:

The large-cap indices eked out gains on Wednesday, as investors lacked conviction following another hot Consumer Price Index (CPI) report for December. The S&P 500 (+0.3%), Nasdaq Composite (+0.2%), and Dow Jones Industrial Average (+0.1%) rose between 0.1-0.3% while the Russell 2000 fell 0.8%.

Ten of the 11 S&P 500 sectors did close in positive territory, but the lightly-weighted materials sector (+1.0%) was the only sector that rose at least 1.0%. The health care sector (-0.3%) was the lone holdout with a modest decline. Declining issues outpaced advancing issues at the Nasdaq.

[…]

The 10-yr yield settled the session down two basis points to 1.73%, and the 2-yr yield decreased one basis point to 0.89%. The U.S. Dollar Index fell 0.7% to 94.95. WTI crude futures rose 1.7%, or $1.38, to $82.52/bbl amid bullish inventory data.

[…]
  • Total CPI rose 0.5% month-over-month in December (Briefing.com consensus 0.4%) and was up 7.0% year-over-year. This represented the sharpest 12-month increase since June 1982. Core CPI, which excludes food and energy, rose 0.6% month-over-month (Briefing.com consensus 0.5%) and was up 5.5% year-over-year. This was the sharpest 12-month increase since February 1991.
  • […]
  • The Treasury Budget showed a $21.3 bln deficit in December versus a $143.6 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the December deficit cannot be compared to the November deficit of $191.3 bln. December marked the 27th consecutive month that the Treasury has seen a budget deficit.
  • […]
  • The weekly MBA Mortgage Applications Index increased 1.4% following a 5.6% decline in the prior week.
  • Weekly EIA crude oil inventories decreased by 4.55 mln barrels after decreasing by 2.14 mln barrels during the previous week.
[…]
  • Dow Jones Industrial Average -0.1% YTD
  • S&P 500 -0.8% YTD
  • Nasdaq Composite -2.9% YTD
  • Russell 2000 -3.1% YTD

Overseas: 

  • Europe: DAX +0.4%, FTSE +0.8%, CAC +0.8%
  • Asia: Nikkei +1.9%, Hang Seng +2.8%, Shanghai +0.8%

Commodities: 

  • Crude Oil +1.38 @ 82.52
  • Nat Gas +0.60 @ 4.85
  • Gold +8.00 @ 1826.80
  • Silver +0.42 @ 23.23
  • Copper +0.15 @ 4.57
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