Morning Notes – Friday January 20, 2017

Directional Bias For The Day:

  • The futures are higher
  • Trending up since 2:00 PM on Thursday
  • Bullish Chinese economic data
  • Thursday’s pattern was bearish in nature
  • Odds are for an up to sideways day; watch for break below 2262.50 for change of fortunes

Markets Around The World

  • Markets in the East were mixed: Shanghai and Tokyo were up; Hong Kong, Sydney, Mumbai and Seoul were down;
  • European markets are mostly up: Switzerland and STOXX 600 are down
  • Dollar index and USD/JPY are up; GBP/USD and EUR/USD  are down
  • Commodities are mostly down: only crude oil is up
  • 10-yrs yield closed at 2.459% up from Jan 18 close of 2.389%; 30-years closed at 3.032% up from 2.985% on Jan 18

Key Levels:

  • Critical support levels for S&P 500 are 2260.67, 2258.41 and 2254.25
  • Critical resistance levels for S&P 500 are 2274.33.47, 2278.68 and 2282.10
  • Key levels for eMini futures: break above 2269.50, high at 9:30 PM on January 19 and break below 2262.50, the low of 2:00 AM


  • Pre-NYSE session open, futures price action is to the upside – at 8:00 AM, S&P 500 futures were up by +3.75, Dow by +8.00 and NASDAQ by +11.75
  • On Thursday, at 4:00 PM, S&P future (March contract) closed at 2258.75 and the index closed at 2263.69 – a spread of about 5.00 points; futures closed at 2261.50 for the day; the fair value is -2.75

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

  • Confirmed Uptrend
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2%
  • Candlestick for the last week was a narrow body with longer lower shadow than upper shadow; week before it was large green candle than open in the middle of previous large bearish engulfing and closed above the highs
  • Break of the high of week 2-Jan, 2282.10, is critical for the continuation of the uptrend
  • Broke above a down-sloping flag on November 14, 2016; first target is 2285.92; next 2363.14
  • Last swing low, 2083.79, was the low on November 4, 2016
  • Above 39-week SMA and 89-week SMA
  • Emerging broadening pattern since December 12
  • Thursday, January 19, was a bearish engulfing pattern in the middle of the broadening pattern
  • Above 100-day, 200-day and 50-day; at 20-day SMA
  • Sequence of higher highs and higher lows
  • Last swing low 2263.62
2-Hour (e-mini future)
  • Downward pressure; hugging the downtrend line from January 6 high; lower high, lower lows since 12:00 PM on Jan 6, the sequence was broken at 8:00 AM on Jan 13 with a higher high; waiting for a follow up higher low
  • Broke above a down-sloping flag at 10:00 AM on Jan 6; fell back into it at 8:00 Am on Jan 9;
  • Flag pattern is morphing in to a broadening pattern
  • Another down-sloping flag emerging within the broadening pattern
  • Broke the uptrend line from low at 2:00 PM on Dec 30
30-Minute (e-mini future)
  • The emerging symmetrical triangle morphed into a horizontal channel with couple of spikes above and below
  • Broken above the downtrend line from the high at 9:00 AM on Jan 13
  • Touched the 78.6% Fib retracement of the rise from Jan 12 low of 2248.50 to Jan 13 high of 2273.50
  • Above slightly rising 50-bar EMA and 20-day EMA

Previous Session

U.S. indices were mostly down on Thursday January 19. Only Dow Jones Transportation Average advanced but it too closed below the open.

Like on Wednesday, the day’s action did not change the emerging pattern materially. The range was narrow with S&P 500, DJIA and NASDAQ Composite having moved only 0.7%-0.8% from high to low.

DJIA is at the lower limit of its narrow horizontal trading range but Russell 2000 closed below its similar range. Both are below their 20-day EMA. S&P 500, NYSE Composite and Wilshire 5000 Total Market Index are in the middle of their broadening pattern at the 20-0day EMA. NASDAQ Composite has moved sideways for three days. All have made a bearish engulfing pattern on Thursday.

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