Market Remarks

Morning Notes – Friday, January 6, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; futures shot up following the Non-Farm Payroll report at 8:30 AM
  • The odds are for an up day with elevated volatility – watch for a break below 3855.50 for a change of sentiments
  • The major economic data report is due during the day:
    • Non-Farm Employment Change ( 223K vs. 200K est.; prev. 263K) at 8:30 AM
    • Unemployment Rate (3.5% vs. 3.7% est.; prev. 32.7%) at 8:30 AM
    • Average Hourly Earnings ( 0.3% vs. 0.4% est.; prev. 0.6%) at 8:30 AM
    • ISM Services PMI ( 55.0 est.; prev. 56.5) at 10:00 AM
    • Factory Orders ( 51.0 est.; prev. 51.4) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3830.35, 3803.38, and 3794.33
  • Critical resistance levels for S&P 500 are 3854.30, 3868.71, and 3878.46
  • The key levels for E-mini futures are a break above 3885.50, the high at 7:30 AM on Wednesday, and a break below 3855.50, the low at 8:45 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (March 2023) closed at 3829.00, and the index closed at 3808.10 – a spread of about +20.75 points; the futures closed at 3829.00; the fair value is 0.00
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up +32.00, Dow by +315, and NASDAQ by +100.75

Markets Around The World

  • Markets in the East closed mixed
  • European markets are mostly higher- Germany is lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CAD
  • AUD/USD
  • EUR/USD
  • GBP/USD
  • USD/CHF
  • NZD/USD
  • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are lower
    • Precious metals are mixed
    • Industrial metals are higher
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.720, up +5.1 basis points from two weeks ago;
    • The 30-year is at 3.798%, up +7.5 basis points;
    • The 2-year yield is at 4.466%, up +20.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.746, down from -0.588
    • The 30-Year-&-10-Year spread is at 0.078, up from 0.054
  • VIX
    • At 22.01 @ 8:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 24.30 on December 22; low = 19.94 on December 21
    • Sentiment: Risk-On

The trend and patterns in various time frames for S&P 500:

Weekly:
  • The week ending on December 30 was a small Doji candle with almost no upper shadow and a small lower shadow
    • Stochastic (9,1, 3): %K is below %D ; below 40;
    • RSI-9 is around 45
  • The week was down -5.32 or -0.1%; the 5-week ATR  is 158.39
  • A down week, fourth in the last five weeks, and sixth in the previous ten weeks;
  • The weekly pivot point=3826.16, R1=3871.53, R2=3903.57; S1=3794.12, S2=3748.75; no pivot levels were breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A red candle with almost no upper shadow and a small lower shadow; moving sideways since December 16, 2022, between 3890.91 and 3764.49
    • Stochastic (9, 1, 3): %K crossed below %D;
    • RSI-9 is just below 50; below 8-DMA
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Moving just above the lower bound of a symmetric triangle – emerging since December 16, 2022, near the lower bound of a downtrend – a break below 3814.50 or above 3901.50 will be critical.
    • RSI-21 has broken below its symmetric triangle over the corresponding period
    • Below EMA20, which is below EMA10 of EMA50 
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Breaking above a Horizontal Channel between 3849.00 and 3824.00 – the 61.8% extension target near 3864.45 is achieved; the 100 % extension target is near 3774.00, and the 161.8% extension target is near 3889.0
    • RSI-21 crossed above 50
    • Above EMA10 of EMA50, which is above EMA20
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving down since 3:15 PM
  • The Bollinger Band is expanding since 8:30 AM – price shooting above the upper band
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Thursday, January 5, in lower volume. The major indices are moving within a relatively narrow range for the past few days. Moving sideways since December 16, 2022. All but one S&P sector – Energy – closed higher.

From Briefing.com:

[…]

Today’s trade was decidedly negative with the market giving up yesterday’s gains and then some. The main indices saw some choppy action and remained pinned below their flat lines for the entire session. The S&P 500 closed just above the 3,800 level after hitting a high of 3,873 in yesterday’s trade.

[…]

The 10-yr note hit 3.78% earlier before settling the session at 3.72%. The 2-yr note yield rose eight basis points to 4.45%.

With market participants trading more cautiously, ten of the 11 S&P 500 sectors closed in the red. The real estate (-2.9%) and utilities (-2.2%) were the worst performers while energy (+2.0%) was alone in positive territory.

[…]
  • Dow Jones Industrial Average: -0.8% YTD
  • S&P Midcap 400: flat YTD
  • S&P 500: -0.8% YTD
  • Russell 2000: -0.5% YTD
  • Nasdaq Composite: -1.5% YTD
[…]
  • The ADP Employment Change showed that private employers added 235,000 jobs in December after a 127,000 increase in November.
  • Initial jobless claims for the week ending December 31 decreased by 19,000 to 204,000 (Briefing.com consensus 225,000). That is the lowest level of initial claims since September. Continuing jobless claims for the week ending December 24 decreased by 24,000 to 1.694 million.
  • […]
  • The trade deficit narrowed to $61.5 billion in November (Briefing.com consensus -$76.4 billion) from an upwardly revised $77.8 billion (from -$78.2 billion) in October. That is the smallest trade deficit since September 2020 and it was the result of exports being $5.1 billion les than October exports and imports being $21.5 billion less than October imports.
  • […]
  • The final IHS Markit Services PMI reading for December came in at 44.7 after the prior reading of 44.4.
  • The weekly EIA Natural Gas Inventories showed a draw of 221 bcf versus a draw of 213 bcf last week. Natural gas futures took a turn lower after the release, down 7.8% to $3.49/mmbtu.
  • The weekly EIA Crude Oil Inventories showed a build of 1.69 million barrels after last week’s build of 0.718 million barrels. WTI crude oil futures are up 1.3% to $73.81/bbl.
[…]

Overseas: 

  • Europe: DAX market closed, FTSE market closed, CAC market closed
  • Asia: Nikkei market closed, Hang Seng market closed, Shanghai market closed

Commodities: 

  • Crude Oil +0.71 @ 73.68
  • Nat Gas -0.33 @ 3.43
  • Gold -16.50 @ 1840.60
  • Silver -0.45 @ 23.44
  • Copper +0.10 @ 3.83
[…]
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