Market Remarks

Morning Notes – Wednesday, January 26, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:45 AM; up more than 115 points from 4:15 PM lows of 4296.50
  • The odds are for an up day with elevated volatility; watch for a break below 4392.50 and 4345.25 for a change of sentiments
  • Key economic data report due during the day:
    • New Home Sales ( 759K est.; prev. 744K) at 10:00 AM
    • FOMC Statement at 2:00 PM
    • Fed Funds Rate ( <0.25% est.; prev. <0.25%) at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4411.00, 4349,22, and 4307.06
  • Critical resistance levels for S&P 500 are 4426.05, 4443.58, and 4455.44
  • Key levels for E-mini futures: break above 4427.50, the high of 9:00 PM on January 23 and break below 4392.50, the low of 5:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (March 2022) closed at 4351.00 and the index closed at 4356.45 – a spread of about -5.50 points; futures closed at 4349.00 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +66.50; Dow by +378; and NASDAQ by +306.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, and Singapore closed up; Tokyo and Seoul closed down; Sydney and Mumbai were closed
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • 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 1.782%, up +3.6 basis points from two weeks ago;
    • 30-years is at 2.124%, up +5.1 basis points;
    • 2-years yield is at 1.016%, up +13.0 basis points;
    • The 10-Year-&-2-Year spread is at 0.766, up from 0.860
    • The 30-Year-&-10-Year spread is at 0.342, down from 0.327
  • VIX
    • At 28.59 @ 8:00 AM; down from the last close; at/below the 5-day SMA;
    • Recent high = 38.9 on January 24; 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 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 small red candle with long shadows that looked like a Harami Doji; a break above or below its extremes will give clues for the next few day’s price directions
  • Stochastic (9, 1, 3): %K crossed above %D from near 0
    • RSI-9 is again fallen 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; bounced off from January 24 lows of 4212,75 to 4420.00; 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 has risen to just below 60 from below 20 after a Bullish Divergence
    • Above EMA20 but below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Approaching the downtrend line from January 4 high from below; forming a saucer pattern since 4:00 PM on Monday; sequence of lower highs and lower lows;
    • RSI-21 is trending up; just above 60
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 2:45 AM
  • The Bollinger Band is contracting since 8:00 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Tuesday, January 25, in lower volume. In the early trading, the major indices declined and then rose to highs for the day before declining again in the last hour of trading. Most indices made Harami candles.

From Briefing.com:

The S&P 500 fell 1.2% on Tuesday in another volatile session. The benchmark index was down as much as 2.8% in the morning, then briefly peaked above its flat line in the afternoon. Growth stocks paced today’s decline and accounted for the underperformance of the Nasdaq Composite (-2.3%).

The Dow Jones Industrial Average (-0.2%) was unable to hold onto a late gain and closed slightly lower. The Russell 2000 fell 1.5%.

From a sector perspective, the information technology (-2.3%), communication services (-2.2%), and consumer discretionary (-1.8%) sectors underperformed with steep losses. Conversely, the energy (+4.0%) and financials (+0.5%) sectors were only sectors that closed higher amid higher oil prices ($85.37, +2.06, +2.5%) and Treasury yields. For emphasis, the energy sector rose 4%.

[…]

The 10-yr Treasury note yield rose five basis points to 1.78% while the 2-yr yield rose five basis points to 1.02%. The U.S. Dollar Index increased 0.1% to 95.98.

[…]
  • The Conference Board’s Consumer Confidence Index dropped to 113.8 (Briefing.com consensus 112.0) from a downwardly revised 115.2 (prior 115.8) in December. The dip came after three consecutive monthly increases but is still well above the 87.1 reading registered in the same period a year ago.
  • […]
  • The November FHFA Housing Price Index increased 1.1% m/m following a 1.1% increase in October, and the November S&P Case-Shiller Home Price Index increased 18.3% yr/yr following a revised 18.5% increase (from 18.4%) in October.
[…]
  • Dow Jones Industrial Average -5.6% YTD
  • S&P 500 -8.6% YTD
  • Russell 2000 -10.8% YTD
  • Nasdaq Composite -13.5% YTD

Overseas: 

  • Europe: DAX +0.8%, FTSE +1.0%, CAC +0.7%
  • Asia: Nikkei -1.7%, Hang Seng -1.7%, Shanghai -2.6%

Commodities: 

  • Crude Oil +2.72 @ 85.64
  • Nat Gas +0.04 @ 3.88
  • Gold +11.80 @ 1852.30
  • Silver +0.11 @ 23.99
  • Copper +0.04 @ 4.47
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