Morning Notes – Thursday, January 27, 2022

/ January 27, 2022

Directional Bias For The Day:

  • S&P Futures are higher at 8:45 AM; up more than 110 points from 10:45 PM lows of 4263.25
  • The odds are for an up day with elevated volatility; watch for a break below 4331.50 and 4321.25 for a change of sentiments
  • Key economic data report due during the day:
    • Advance GDP ( 6.9% vs. 5.3% est.; prev. 2.3%) at 8:30 AM
    • Advance GDP Prices ( 6.9% vs. 6.0% Est; prev. 6.0%) at 8:30 AM
    • Core Durable Goods ( 0.4% vs. 0.4% est;prev. 0.9%) at 8:30 AM
    • Durable Goods ( -0.9% vs. -0.6% est; prev. 2.6%) at 8:30 AM
    • Unemploment Claims ( 260K vs. 260K est.; prev. 286K) at 8:30 AM
    • Pending Home Sales ( -0.9% est.; -2.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4358.01, 4321.42, and 4304.80
  • Critical resistance levels for S&P 500 are 4391.77, 4433.53, and 4453.23
  • Key levels for E-mini futures: break above 4318.00, the low of 10:45 AM on Wednesday and break below 4321.25, the low of 5:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (March 2022) closed at 4340.00 and the index closed at 4349.93 – a spread of about -10.00 points; futures closed at 4341.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +35.00; Dow by +172; and NASDAQ by +137.50

Markets Around The World

  • Markets in the East closed lower
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • 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 1.832%, up +10.7 basis points from two weeks ago;
    • 30-years is at 2.122%, up +4.8 basis points;
    • 2-years yield is at 1.0995%, up +18.5 basis points;
    • The 10-Year-&-2-Year spread is at 0.733, up from 0.810
    • The 30-Year-&-10-Year spread is at 0.290, down from 0.349
  • VIX
    • At 30.48 @ 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-Neutral

The trend and patterns in 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 Bearish Engulfing spinning top candle; 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 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 4446.00 and then again declined to a congestion area around 4350.00 level; 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 rising up in waves; just above 50
    • At/above EMA20 but below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Below a downtrend line from January 4 high; moving  mostly within a Horizational Channel between 4440.00 and 4260.00 since 8:00 PM on January 23;
    • RSI-21 is moving up since 9:00 PM on January 26; just above 55
    • Above EMA10 of EMA50, which is at/above EMA20
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 1:30 AM
  • The Bollinger Band is starting to expand at 8:30 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D higher
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly lower on Wednesday, January 26, in higher volume. NASDAQ Composite closed higher. The major indices opened higher and then gradually drifted up before turning around at 2:00 PM following the FOMC statement and the press conference. Most made Bearish Engulfing type candle but the price action of the last few days indicate indecisiveness at this level.

From Briefing.com:

The S&P 500 declined 0.2% on Wednesday, fading a 2.2% intraday gain during Fed Chair Powell’s post-FOMC press conference, which was construed as hawkish-sounding. The Dow Jones Industrial Average (-0.4%) and Russell 2000 (-1.4%) also closed lower, while the Nasdaq Composite (+0.02%) eked out a gain.

Nine of the 11 S&P 500 sectors closed in negative territory, including the real estate (-1.7%) and materials (-1.0%) sectors with losses of at least 1.0%. The information technology (+0.7%) and financials (+0.3%) sectors, however, provided offsetting support with modest gains.

[…]

The 2-yr Treasury note yield, which tracks expectations for the fed funds rate, rose six basis points to 1.08% (touched 1.15% post-settlement). The 10-yr yield rose seven basis points to 1.85%. The U.S. Dollar Index rose 0.6% to 96.48. WTI crude futures rose 2.0%, or $1.73, to $87.36/bbl.

[…]
  • New home sales increased 11.9% month-over-month in December to a seasonally adjusted annual rate of 811,000 units (Briefing.com consensus 765,000) from a downwardly revised 725,000 (from 744,000) in November. On a year-over-year basis, new home sales were down 14.0%.
  • […]
  • The Advance report for International Trade in Goods for December showed a deficit of $101.0 billion, versus a revised $98.0 billion (from $97.8 billion) in November. The Advance report for Retail Inventories for December rose 4.4%, while the Advance report for Wholesale Inventories for December rose 2.1%.
  • The weekly MBA Mortgage Applications Index fell 7.1% following a 2.3% increase in the prior week.
[…]
  • Dow Jones Industrial Average -6.0% YTD
  • S&P 500 -8.7% YTD
  • Russell 2000 -12.0% YTD
  • Nasdaq Composite -13.4% YTD

Overseas: 

  • Europe: DAX +2.2%, FTSE +1.3%, CAC +2.1%
  • Asia: Nikkei -0.4%, Hang Seng +0.2%, Shanghai +0.7%

Commodities: 

  • Crude Oil +1.74 @ 87.38
  • Nat Gas +0.14 @ 4.02
  • Gold -20.70 @ 1831.60
  • Silver -0.06 @ 23.93
  • Copper +0.04 @ 4.52
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