Market Remarks

Morning Notes – Monday, January 24, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM; declined more than 60 points since 7:00 AM
  • The odds are for a down day with elevated volatility and with a good potential for a bounce back from lows; watch for a break above 4386.75 for a change of sentiments
  • Key economic data report due during the day:
    • Flash Manufacturing PMI ( 56.9 est.; prev. 57.7) at 9:45 AM
    • Flash Services PMI ( 54.9 est.; prev. 57.6) at 9:45 AM

Directional Bias Before Open:

  • Weekly: Correction
  • Daily: Correction
  • 120-Min: Down
  • 30-Min: Down
  • 15-Min: Down
  • 6-Min: Down

Key Levels:

  • Critical support levels for S&P 500 are 4329.92, 4306.12, and 4290.49
  • Critical resistance levels for S&P 500 are 4453.83, 4372.87, and 4386.75
  • Key levels for E-mini futures: break above 4361.25, the low of 5:30 AM and break below 4311.75, the low of 9:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (March 2022) closed at 4385.50 and the index closed at 4397.94 – a spread of about -9.50 points; futures closed at 4390.00 for the day; the fair value is -4.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -66.00; Dow by -402; and NASDAQ by -272.25

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 31.92 @ 8:30 AM; up from the last close; above 5-day SMA;
    • Recent high = 35.32 on December 03, 2021; low =  17.36 on January 12
    • 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 January 21 was a large red candle with almost no upper and lower shadows;
    • Stochastic (9,1, 3): %K is below %D; near zero
    • RSI-9 is near 35 after making a Bearish Divergence during the week ending on December 27, 2021
  • The week was down -264.91 or -5.7%; the 5-week ATR  is 176.55
  • A down week; third in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4475.17, R1=4555.01, R2=4712.07; S1=4318.11, S2=4238.27; S1/S2/Se pivot levels were breached
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • In Correction
Daily
  • Another large red candle with a small upper shadow and almost no lower shadow; broke below a bearish ABCD pattern – the 161.8% extension target near 4366.37 is achieved; broke below a 250 points trading range – the 61.8% extension target is near 4341.00 and the 100% extension target is near 4250.00
    • Stochastic (9, 1, 3): %K is below %D; near 0
    • RSI-9 is trending down; broke below 25; below 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA
  • In Correction
2-Hour (E-mini futures)
  • Downtrend since January 4; broke below a horizontal channel – 61.8% extension target near 4340.00 is achieved; the 100% extension target is near 4245.00 and the 161.8% extension target is near 4090.00
    • RSI-21 is moving around 30; potential Bullish Divergence
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Below a downtrend line from since January 4 high; sequence of lower highs and lower lows; fresh leg down since 3:00 AM
    • RSI-21 is below 30
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 4:45 AM
  • The Bollinger Band is expanding since 3:30 AM with price walking down the lower bound
    • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Friday, January 21, in higher volume. Major indices opened lower and after a short bounce in the morning trade, they turned down and steadily declined for the rest of the day closing near the day’s lows.

For the week, the US indices were lower in mostly higher volume. Dow Jones Industrial Average traded in lower volume. Markets in Asia and Europe closed mostly down. The dollar index was up, energy futures were mixed, metals futures were up and soft commodities were mixed for the week. The US Treasury yields closed down for the week.

From Briefing.com:

The S&P 500 fell 1.9% on Friday, […]

The Nasdaq Composite declined 2.7%, the Dow Jones Industrial Average declined 1.3%, and the Russell 2000 declined 1.8%.

Eight of the 11 S&P 500 sectors fell at least 1.0%, including the communication services sector with a 3.9% decline. The consumer staples sector (+0.02%) closed fractionally higher.

[…]

The 2-yr yield fell six basis points to 0.99%, and the 10-yr yield fell nine basis points to 1.75%. The U.S. Dollar Index decreased 0.1% to 95.63. WTI crude futures fell 1.3%, or $1.13, to $85.16/bbl.

[…]
  • Dow Jones Industrial Average -5.7% YTD
  • S&P 500 -7.7% YTD
  • Russell 2000 -11.5% YTD
  • Nasdaq Composite -12.0% YTD
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