Morning Notes – Monday January 27, 2020

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day with elevated volatility
  • Futures are sharply down at the open and there is great chance of a bounce from pre-open low levels
  • Key economic data due:
    • New Home Sales ( est. 730K; prev. 719K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3238.35, 3232.43 and 3214.64
  • Critical resistance levels for S&P 500 are 3251.95, 3260.86 and 3277.19
  • Key levels for eMini futures: break above 3253.00, the high of 7:00 AM and break below 3235.75, the low of 6:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (March 2020) closed at 3294.50 and the index closed at 3295.47 – a spread of about -1.00 points; futures closed at 3293.50 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 9:15 AM, S&P 500 futures were down by -56.50; Dow by -470 and NASDAQ by -185.00

Markets Around The World

  • Markets in the East were mostly closed, the ones open – Tokyo and Mumbai – ended down for the day
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Cocoa
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.622%, down from January 23 close of 1.740%;
    • 30-years is at 2.078%, down from 2.182%
    • 2-years yield is at 1.489%, down from 1.518%
    • The 10-Year-&-2-Year spread is at 0.192down from 0.222
  • VIX
    • Is at 18.62 up +4.06 from January 24; above 5-day SMA
    • Next high resistance is 21.46, the high of October 2, 2019; the low support is the low was 11.72 on December 26

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

Monthly
  • 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
Weekly:
  • The week ending on January 24 was a red harami candle with small upper and lower shadows that made all time high
    • Continuing the break above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D; above 90; potential bearish divergence
    • RSI (9) has turned down below 80; potential Bearish Divergence with January 2018 level
  • Last week was down -34.15 or -1.0%; the 5-week ATR is 52.53
  • Last week’s pivot point=3304.92, R1=3328.32, R2=3361.16; S1=3272.08, S2=3248.68; S1 pivot level was breached
  • A down week; second in last five weeks and third 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
Daily
  • A relatively large red bearish engulfing candle with almost no upper shadow and small lower shadows; near all time highs
    • %K is below %D; below 40 ;
    • RSI-9 has turned down; near 50; 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)
  • Breaking down since 8:00 AM on Friday; gapped down at the week’s open and moving down; the next significant support is near 3181.00, the low of 6:00 PM on January 7
    • RSI-21 fallen below 20 sine 12:00 PM on Friday
    • %K is crisscrossing %D around 10
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving down sharply since 9:30 AM on Friday; broke below a trading range between 3336.50 and 3307.25; price approaching the 261.8% extension target near 3230.00
    • RSI-21 is moving around 25 since 2:00 PM on Friday
    • %K is crisscrossing %D around 30
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 9:30 AM on Friday
  • The Bollinger Band narrowed from 11:30 PM on Sunday to 4:00 AM; expanded since with price mostly walking down the lower band
  • Stochastic (9, 1, 3): %K is below %D since 7:30 AM;
  • Bias: Down

Previous Session

Major U.S. indices closed sharply lower on Friday, January 24 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. All but one S&P sectors – Utilities – closed down. Major indices mostly made bearish engulfing candle pattern.

For the week, major U.S> indices closed down in mostly lower volume. DJT was the only index to trade in higher volume. All but three S&P sectors – Technology, Utilities and Real Estate – closed down. Most Asian and European indices also closed down for the week. Only Sydney, DAX and Swiss market were up over the week.

From Briefing.com:

The S&P 500 lost 0.9% on Friday in a steady decline from opening levels, as risk sentiment was dampened by the CDC confirming the second case of coronavirus in the U.S. The Nasdaq Composite lost 0.9%, the Dow Jones Industrial Average lost 0.6%, and the Russell 2000 lost 1.4%.

The day started in positive territory, with the Nasdaq even setting a new intraday high, after Intel (INTC 68.47, +5.15, +8.1%) and American Express (AXP 135.11, +3.74, +2.9%) impressed investors with earnings and guidance. The early lead dissipated amid a view that the coronavirus could impinge discretionary spending and earnings growth.

[…]

The 2-yr yield declined four basis points to 1.48%, and the 10-yr yield declined six basis points to 1.68%. The U.S. Dollar Index increased 0.2% to 97.86. WTI crude dropped 2.5% (-$1.40) to $54.21/bbl, as expectations for oil demand continued to weaken amid the spread of the coronavirus.

[…]

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