Morning Notes – Wednesday January 8, 2020

Directional Bias For The Day:

  • S&P Futures are higher following a nearly 50+ points drop during Asian session;
  • The odds are for an up day with elevated volatility – watch for break below 3221.75 for change of fortune
  • Key economic data due:
    • ADP Non-Farm Employment Change (202K vs.160K est.; prev. 124K ) at 8:15 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3232.43, 3214.64 and 3205.37
  • Critical resistance levels for S&P 500 are 3242.71, 3246.15 and 3257.54
  • Key levels for eMini futures: break above 3244.75, the high of 11:00 AM on Tuesday and break below 3221.75, the low of 0:30 AM


  • On Tuesday, at 4:00 PM, S&P future (March 2020) closed at 3237.25 and the index closed at 3237.18 – a spread of about +0.00 points; futures closed at 3235.25 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +9.00; Dow by +13 and NASDAQ by +30.50

Markets Around The World

  • Markets in the East closed lower
  • European markets are mostly up – U.K. and Switzerland are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Crude Oil
    • Gold
    • Silver
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.827%, up from January 6 close of 1.811%;
    • 30-years is at 2.305%, up from 2.281%
    • 2-years yield is at 1.544%, up from 1.536%
    • The 10-Year-&-2-Year spread is at 0.283 up from 0.275
  • VIX
    • Is at 13.98 up from January 7 close of 13.79; above 5-day SMA
    • Recent high was 17.99 on December 3; recent low was 11.72 on December 26

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

  • Uptrend
  • December 2019 was a relatively large green candle with small upper shadow and a lower shadow half the size of the real body; fourth up month in a row and tenth in 2019
    • Stochastic %K is above %D and above 90
    • RSI-9 is breaking above a downtrend line from January 2018 high; above 70
    • Rising to the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 is broken in December since then a new high has been made
  • The week ending on January 3 was a doji candle
    • Continuing the break above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed above %D; above 90; potential bearish divergence
    • RSI (9) is above 80
  • Last week was down -5.17 or -0.2%; the 5-week ATR is 53.45
  • Last week’s pivot point=3235.01, R1=3257.98, R2=3281.12; S1=3211.87, S2=3188.90; R1/S1 pivot levels were breached
  • First down week in last five weeks and second in last ten weeks
  • Near all time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • Above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
  • A relatively small red harami candle;
    • %K is below %D from above 70; potential %D Bearish Divergence
    • RSI-9 is turning down near 60; below 8-day SMA; potential bearish divergence
  • Above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend
2-Hour (e-mini future)
  • Mostly moving sideways since 4:00 Pm on December 26; declined sharply during Asian session from 3254.50 to 3181.00 and now bounced up the near NYSE session close on January 7
    • RSI-21 bounced up from below 20 to above 50
    • %K crossed above %D at 8:00 PM on Tuesday after making %K bullish divergence
  • A broadening pattern is emergning
  • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Up-Side
30-Minute (e-mini future)
  • Essentially moving sideways since December 20; at January 2 Asian session level; bounced off at 7:30 PM on Tuesday after a sharp decline from 3233.75 at 6:0 PM to 3181.00
    • RSI-21 bounced from near 20 to near 60
    • %K is crisscrossing %D around 70 since 10:30 PM
  • Below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is trending up since 2:00 AM
  • The Bollinger Band was relatively small from 2:00 AM to 5:15 AM after a sudden broadening from 4:40 PM to 1:30 AM; expanding since 5:30 AM with price mostly walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower since 6:00 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly lower on Tuesday, January 7 in mixed volume. Dow Jones Transportation Average closed higher and Dow Jones Industrial Average and NASDAQ Composite traded in higher volume. Most major indices made small candles showing indecision.


The S&P 500 wavered with modest losses on Tuesday, losing 0.3% as the current geopolitical uncertainty helped restrain risk sentiment. The Dow Jones Industrial Average (-0.4%) and Russell 2000 (-0.3%) posted comparable declines, while the Nasdaq Composite (unch) fared better amid strength in the semiconductor space.


Within the stock market, all 11 S&P 500 sectors still finished lower in a lackluster session. The real estate sector (-1.2%) was today’s weakest performer, followed by the consumer staples (-0.7%) and financials (-0.7%) sectors. A fade into the close pushed the communication services (-0.04%), information technology (-0.1%), and industrials (-0.1%) sectors into negative territory.


U.S. Treasuries finished the tight-ranged session little changed. The 2-yr yield remained at 1.54%, the 10-yr yield increased two basis points to 1.83%. The U.S. Dollar Index increased 0.4% to 97.02.


• The ISM Non-Manufacturing Index for December registered a 55.0% reading ( consensus 54.3%), up from 53.9% in November and the fastest pace since August 2019.
o The key takeaway from the report is that it is not as encouraging as it appears at first blush. The pace of new orders, new export orders, and employment all slowed; meanwhile, the backlog of orders contracted at a faster pace than November.
• Factory Orders declined 0.7% m/m in November ( consensus -0.8%) following a downwardly revised 0.2% increase (from 0.3%) in October. Shipments were up 0.3% following a 0.1% increase in October.
o The key takeaway from the report is that it reflects the soft conditions for the manufacturing sector. On a year-to-date basis, orders for durable goods were down 1.3% not seasonally adjusted while orders for nondurable goods were down 0.1%.
• The trade deficit narrowed to $43.1 billion in November ( consensus -$43.5 billion) from an upwardly revised $46.9 billion (from -$47.2 bln) in October.
o The key takeaway from the report is that the real trade deficit of $75.25 billion left the fourth quarter average 9% below the third quarter average, which will be a positive input for Q4 GDP growth forecasts.

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