Morning Notes – Friday, January 28, 2022

/ January 28, 2022

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; declined from 4335.75 at 9:45 PM to 4266.50 at 7:45 AM and then bounced up to around 4315.00
  • The odds are for a down day with elevated volatility; watch for a break above 4334.00 for a change of sentiments
  • Key economic data report due during the day:
    • Perosnl Income ( 0.3% vs. 0.5% est.; prev. 0.5%) at 8:30 AM
    • Personal Spending (-0.6% vs. -0.6% est.; prev. 0.4%) at 8:30 AM
    • Employment Cost Index ( 1.0% vs. 1.2% est.; prev. 1.23%) at 8:30 AM
    • PCE Price Index ( 0.4% vs. 0.4% est;prev. 0.6%) at 8:30 AM
    • Core PCE Price Index ( 0.5% vs. 0.5% est; prev. 0.5%) at 8:30 AM
    • Revised UoM Consumer Sentiment ( 68.8 es.; prev. 68.8) at 10:00 AM
    • Revised UoM Inflation Expectations ( prev. 4.9% ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4304.80, 4287,11, and 4222.62
  • Critical resistance levels for S&P 500 are 4352.91, 4374.26, and 4403.69
  • Key levels for E-mini futures: break above 4334.00, the high of 4:15 AM and break below 4266.50, the low of 7:45 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2022) closed at 4317.75 and the index closed at 4326.51 – a spread of about -8.75 points; futures closed at 4317.75 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -14.00; Dow by -150; and NASDAQ by -18.0

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 32.17 @ 8:15 AM; up from the last close; above the 5-day SMA;
    • Recent high = 38.9 on January 24; low =  17.36 on January 12
    • Sentiment: Risk-Off

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 red spinning top candle; within the extremes of the previous day;
  • Stochastic (9, 1, 3): %K crossed below %D below 30
    • 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; 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 mostly declining since 8:00 AM on January 26 from just above 55; moving around 45
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Below a downtrend line from January 4 high; bouncing off the lower bound of a Horizational Channel between 4440.00 and 4260.00 since 8:00 PM on January 23; a break below will lead to the 61.8% extension target near 410.00 and the 100% extension target near 4080.00
    • RSI-21 is bouncing up from around 35 to near 45
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to down since 6:30 PM
  • The Bollinger Band is expanding since 3:00 AM; price walked down the lower bound and then crossed above the middle band at 8:30 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D higher
  • Bias: Side-Down

Previous Session

Major U.S. indices closed lower on Thursday, January 27, in lower volume. The price action was similar to that on Wednesday. The major indices opened higher and then drifted sideways before turning around at 12:00 PM and declining to close near the lows. The price action of the last few days continues to indicate indecisiveness albeit with a down bias.

From Briefing.com:

The S&P 500 lost 0.5% on Thursday, closing lower for the third straight day as investors sold into early strength amid lingering concerns about a hawkish Fed. The Nasdaq Composite (-1.4%) and Russell 2000 (-2.3%) posted steeper declines while the Dow Jones Industrial Average (-0.02%) closed fractionally lower.

[…]

Despite the negative index closes, six of the 11 S&P 500 sectors still closed in positive territory, including energy (+1.2%), utilities (+0.8%), and consumer staples (+0.6%). The consumer discretionary (-2.3%), information technology (-0.7%), and financials (-0.9%) sectors were the influential laggards.

[…]

Separately, the U.S. Dollar Index rose 1.4% to 97.25 amid a view that rate hikes will drive greater demand for the dollar in an environment where foreign central banks are hesitant to rein in policy support. Crude futures ($86.62, -0.74, -0.9%) and precious metals were clipped by the stronger dollar.

[…]
  • The Advance Q4 GDP report showed real GDP increasing at an annual rate of 6.9% (Briefing.com consensus 5.6%) following a 2.3% increase in the third quarter. The GDP Chain Deflator was also up 6.9% (Briefing.com consensus 5.9%) after a 6.0% increase in the third quarter.
  • […]
  • Initial jobless claims for the week ending January 22 decreased by 30,000 to 260,000 (Briefing.com consensus 260,000). Continuing claims for the week ending January 15 increased by 51,000 to 1.675 million.
  • […]
  • December Durable Goods Orders decreased 0.9% month-over-month (Briefing.com consensus -0.5%) while orders, excluding transportation, increased 0.4% (Briefing.com consensus 0.4%).
[…]
  • Dow Jones Industrial Average -6.0% YTD
  • S&P 500 -9.2% YTD
  • Russell 2000 -14.0% YTD
  • Nasdaq Composite -14.7% YTD

Overseas: 

  • Europe: DAX +0.4%, FTSE +1.1%, CAC +0.6%
  • Asia: Nikkei -3.1%, Hang Seng -2.0%, Shanghai -1.8%

Commodities: 

  • Crude Oil -1.00 @ 86.38
  • Nat Gas +0.27 @ 4.29
  • Gold -36.70 @ 1794.90
  • Silver -1.18 @ 22.75
  • Copper -0.10 @ 4.42
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