Morning Notes – Thursday, January 20, 2022

/ January 20, 2022

Directional Bias For The Day:

  • S&P Futures are higher at 8:15 AM; retreated 10 points from a high of 4552.00 at 4:00 AM and after gaining 38 points from yesterday’s low
  • The odds are for an up day with elevated volatility; watch for a break below 4528.75 for a change of sentiments
  • Key economic data report due during the day:
    • PhillyFed Manufacturing Index ( 23.2 vs. 18.9 est.; prev. 15.4 ) at 8:30 AM
    • Unemployment Claims ( 285K vs. 227K est.; prev. 230K) at 8:30 AM
    • Existing Home Sales ( 6.42M est.; prev. 6.46M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4530.20, 4503.97, and 4495.12
  • Critical resistance levels for S&P 500 are 4561.27, 4576.08, and 4597.37
  • Key levels for E-mini futures: break above 4552.00, the high of 6:15 AM and break below 4528.75, the low of 4:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2022) closed at 4524.75 and the index closed at 4532.76 – a spread of about -8.00 points; futures closed at 4524.25 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +16.50; Dow by +116; and NASDAQ by +115.25

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Mumbai closed lower
  • European markets are mixed – Germany, Italy, Switzerland, and STOXX 600 are up; the UK, France, and Spain are down
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.827%, up +12.2 basis points from two weeks ago;
    • 30-years is at 2.138%, up +5.0 basis points;
    • 2-years yield is at 1.055%, up +21.3 basis points;
    • The 10-Year-&-2-Year spread is at 0.772, up from 0.863
    • The 30-Year-&-10-Year spread is at 0.311, down from 0.383
  • VIX
    • At 23.10 @ 7:00 AM; down from the last close; above 5-day SMA;
    • Recent high = 23.99 on January 19; low =  17.36 on January 12
    • 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 14 was a Doji candle;
    • Stochastic (9,1, 3): %K is below %D;
    • RSI-9 is just above 55
  • The week was down -14.18 or -0.3%; the 5-week ATR  is 149.40
  • A down week; third in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4664.64, R1=4747.04, R2=4831.23; S1=4580.45, S2=4498.05; S1 pivot level was breached
  • At/below 10-week EMA; above 39-week SMA; above 89-week SMA
  • Uptrend Under Pressure
Daily
  • A large red candle with a relatively small upper shadow and almost no lower shadow; broke below an uptrend line from December 3, 20222 low; a sequence of higher lows and higher highs is in danger of breaking; broke below a bearish ABCD pattern – the 61.8% extension target near 4602.00 is achieved; the 100% extension target is near 4512.45 and the 161.8% extension target is near 4366.37
    • Stochastic (9, 1, 3): %K is below %D; near
    • RSI-9 broke below 30; below 8-day EMA;
  • Below 20-day EMA and 50-day EMA; at/below 100-day SMA; above 200-day SMA
  • In Correction
2-Hour (E-mini futures)
  • Downtrend since January 4; New leg down since 9:30 AM on January 13; bounced up slightly from 4:00 PM  low of 4517.25 to above 4540.00
    • RSI-21 is just above 40 from below 30 and after making Bullish Divergence at 4:00 PM
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Below a downtrend line from since January 4 high; moved up 20+ points from 4:00 PM  low of 4517.25
    • RSI-21 is moving around 50 after making Bullish Divergence at 4:00 PM
    • At/below EMA20, which is at/below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 9:45 PM
  • The Bollinger Band is relatively narrow and stable since 3:15 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D around 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, January 19, in mostly lower volume. NASDAQ Composite traded in higher volume. Major indices opened higher and moved up in the first half-hour of trading but then hit the resistance. After a few tries to break above, indices broke down in the afternoon and turned negative. The decline accelerated in the last half-hour of trading.

From Briefing.com:

The S&P 500 fell 1.0% on Wednesday, fading an early 0.8% gain despite encouraging earnings news and a decline in interest rates. The Nasdaq Composite (-1.2%) and Dow Jones Industrial Average (-1.0%) performed comparably to the benchmark index, while the Russell 2000 lagged with a 1.6% decline.

Nine of the 11 S&P 500 sectors closed lower, as selling interest accelerated into the close on no specific news. The consumer discretionary (-1.8%), financials (-1.7%), and information technology (-1.4%) sectors led the retreat, while the consumer staples (+0.7%) and utilities (+0.5%) sectors closed higher.

[…]

The 2-yr yield declined two basis points to 1.01% after flirting with 1.08% overnight, and the 10-yr yield declined four basis points to 1.83% after flirting with 1.90% overnight. The U.S. Dollar Index declined 0.2% to 95.56. WTI crude futures approached $87.00 per barrel ($86.86/bbl, +1.38, +1.6%).

[…]
  • Housing starts increased 1.4% month-over-month in December to a seasonally adjusted annual rate of 1.702 million (Briefing.com consensus 1.650 million) while permits increased 9.1% month-over-month to 1.873 million (Briefing.com consensus 1.702 million).
  • […]
  • The weekly MBA Mortgage Applications Index increased 2.3% following a 1.4% increase in the prior week.
[…]
  • Dow Jones Industrial Average -3.6% YTD
  • S&P 500 -4.9% YTD
  • Russell 2000 -8.1% YTD
  • Nasdaq Composite -8.3% YTD

Overseas: 

  • Europe: DAX +0.2%, FTSE +0.4%, CAC +0.6%
  • Asia: Nikkei -2.8%, Hang Seng +0.1%, Shanghai -0.3%

Commodities: 

  • Crude Oil +0.44 @ 85.42
  • Nat Gas -0.20 @ 3.85
  • Gold +27.00 @ 1842.20
  • Silver +0.65 @ 24.20
  • Copper +0.06 @ 4.46
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