Morning Notes – Tuesday, January 25, 2022

/ January 25, 2022

Directional Bias For The Day:

  • S&P Futures are lower at 8:30 AM; declined more than 60 points since 5:15 AM; bouncing off from a support level around 4320.00 and forming a descending triangle pattern on 15-min chart
  • The odds are for a down day with elevated volatility and with a good potential for a bounce back from lows similar to the one that happened on Monday; watch for a break above 4392.75 for a change of sentiments
  • Key economic data report due during the day:
    • S&P/CS Composite-20 HPI ( 17.9% est.; prev. 18.4%) at 9:00 AM
    • CB Consumer Confidence ( 111.4 est.; prev. 115.8) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4337.08, 4275.00, and 4222.62
  • Critical resistance levels for S&P 500 are 4360.86, 4392.18, and 4426.05
  • Key levels for E-mini futures: break above 4351.75, the low of 7:15 AM and break below 4319.25, the low of 8:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (March 2022) closed at 4404.75 and the index closed at 4410.13 – a spread of about -5.50 points; futures closed at 4403.75 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -77.75; Dow by -299; and NASDAQ by -321.00

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai closed higher
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • INR/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.765%, down -1.5 basis points from two weeks ago;
    • 30-years is at 2.111%, up +0.1 basis points;
    • 2-years yield is at 0.985%, up +8.7 basis points;
    • The 10-Year-&-2-Year spread is at 0.775, up from 0.882
    • The 30-Year-&-10-Year spread is at 0.345, down from 0.330
  • VIX
    • At 33.03 @ 8:00 AM; up from the last close; above 5-day SMA;
    • Recent high = 38.9 on January 24; 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
  • A long-legged green Hammer candle hat bounced off July 19, 2021 low.  The lower shadow is more than two and a half times of the real body; it looks like a reversal candle but needs to be confirmed in the next few days
  • Stochastic (9, 1, 3): %K crossed above %D from near 0
    • RSI-9 is turning up from below 20; 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 – the 100% extension target near 4245.00 is achieved; the 161.8% extension target is near 4090.00
    • RSI-21 is moving just below 40; potential Bullish Divergence
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Below a downtrend line from January 4 high; sequence of lower highs and lower lows; bounced up from January 24 low and moving sideways to down since 4:00 PM
    • RSI-21 is moving around 45
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to down since 12:15 AM within a very large range
  • The Bollinger Band is expanding slightly since 5:30 AM with price walking down the lower bound
    • Stochastic (9, 1, 3): %K is crisscrossing %D around 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed higher on Monday, January 24, in higher volume. Major indices gapped down at the open and then traded sharply down in the morning session extending losses to 2-3% and higher. Then they turned around and steadily advanced before closing higher slightly. The day’s price-action looked like a reversal day but needs confirmation in the next few days.

From Briefing.com:

The S&P 500 increased 0.3% on Monday in a furious buy-the-dip trade after being down as much as 4.0% intraday. The Nasdaq Composite gained 0.6% after being down 4.9% intraday, and the Dow Jones Industrial Average gained 0.3% after being down 3.3% intraday.

The Russell 2000 outperformed with a 2.3% gain after being down as much as 2.8%. The small-cap index traded in bear market territory today, or down at least 20% from a recent high, so its outperformance stemmed from the fact that it was hit the hardest.

Eight of the 11 S&P 500 sectors closed higher after all 11 traded with steep losses. The consumer discretionary sector (+1.2%) led the recovery effort with a 1% gain, while the defensive-oriented utilities (-1.0%), health care (-0.4%), and consumer staples (-0.4%) sectors closed lower.

[…]

The 10-yr yield declined just one basis point to 1.74% after trading at 1.71% during the day while the 2-yr yield declined two basis points to 0.97%. The U.S. Dollar Index rose 0.3% to 95.92. WTI crude fell 2.2%, or $1.86, to $83.30/bbl.

[…]
  • The preliminary IHS Markit Services PMI for January fell to 55.0 from 57.7 in the final reading for December. The preliminary IHS Markit Services PMI for January fell to 50.9 from 57.6 in the final reading for December.
[…]
  • Dow Jones Industrial Average -5.4% YTD
  • S&P 500 -7.5% YTD
  • Russell 2000 -9.4% YTD
  • Nasdaq Composite -11.4% YTD

Overseas: 

  • Europe: DAX -3.8%, FTSE -2.6%, CAC -4.0%
  • Asia: Nikkei +0.2%, Hang Seng -1.2%, Shanghai flat

Commodities: 

  • Crude Oil -2.11 @ 82.92
  • Nat Gas +0.08 @ 3.84
  • Gold +9.40 @ 1840.50
  • Silver -0.44 @ 23.88
  • Copper -0.08 @ 4.43
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