Morning Notes – Tuesday February 4, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility
  • Key economic data due:
    • Factory Orders ( 0.7% est.; prev. -0.7% ) at 10;00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3268.44, 3256.71 and 3244.30
  • Critical resistance levels for S&P 500 are 3285.91, 3293.47 and 3300.15
  • Key levels for eMini futures: break above 3296.25, the high of 0:00 AM on January 31 and break below 3277.00, the low of 4:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3247.00 and the index closed at 3248.92 – a spread of about -2.00 points; futures closed at 3245.50 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +42.00; Dow by +369 and NASDAQ by +142.50

Markets Around The World

  • Markets in the East were closed higher;
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Platinum
  • Bonds
    • 10-yrs yield is at 1.591%, up from February 3 close of 1.520%;
    • 30-years is at 2.062%, up from 1.997%
    • 2-years yield is at 1.399%, up from 1.351%
    • The 10-Year-&-2-Year spread is at 0.192 up from 0.169
  • VIX
    • Is at 15.76 down -2.21 from February 3; below 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
  • January 2020 was a red shooting star like candle with long upper shadow and almost no lower shadow
    • Stochastic %K turned below %D from above 90
    • RSI-9 is above a downtrend line from January 2018 high; turning down just above 70
    • At the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then
Weekly:
  • The week ending on January 31 was a red candle with very small lower shadow and long upper shadow; gapped down at the open of the week;
    • Above the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D; near 50; bearish divergence
    • RSI (9) is dropped below 60; Bearish Divergence with January 2018 level
  • Last week was down -69.95 or -2.1%; the 5-week ATR is 63.20
  • Last week’s pivot point=3244.56, R1=3374.43, R2=3323.35; S1=3195.64, S2=3165.77; S1/S2/S3 pivot levels were breached
  • A second down week; third 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
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A small green harami candlw with an upper shadow almost equal to the real body and small lower shadow
    • %K is turned up from near zero but below %D
    • RSI-9 is turned up near 40; below 8-day SMA;
  • Below 20-day EMA; at/above 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Moving within a horizontal trading range between 3300.00 and 3230.00; nearing the upper bound
    • RSI-21 is rising since 4:00 PM on January 31 from below 30 to above 70
    • %K is above %D after making a knee pattern at 6:00 PM on Monday
  • Above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 3:30 PM on January 31 in steps; nearing a resistance area around 3300.00
    • RSI-21 is above 40 since Sunday and above 50 since 7:00 PM on Monday
    • %K is crisscrossing %D around 70
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 8:30 PM on Monday
  • The Bollinger Band is relatively stable and large since 8:30 PM
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 70
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday, February 3 in lower volume. Most indices made small green harami candles with relatively large upper shadow and small lower shadows.

From Briefing.com:

The S&P 500 advanced 0.7% on Monday, as investors presumably viewed last week’s drop as a good opportunity to buy the dip. The Nasdaq Composite (+1.3%) and Russell 2000 (+1.1%) outperformed, while the Dow Jones Industrial Average (+0.5%) trailed its peers.

Eight of the 11 S&P 500 sectors posted gains, including the materials (+2.1%), information technology (+1.3%), and communication services (+1.3%) sectors. The latter was aided by shares of Alphabet (GOOG 1485.94, +51.71), which rose 3.6% in front of the company’s earnings report after the close.

The energy sector (-1.3%) remained hampered by falling oil prices ($50.05, -1.53, -3.0%) amid pestering concerns that the coronavirus outbreak will undercut demand for oil. Prices barely reacted to reports that Saudi Arabia will try to convince OPEC+ to agree to large production cuts.

[…]

U.S. Treasuries started the day on a lower note but spent a bulk of intraday action rebounding from session lows. The 2-yr yield increased three basis points to 1.35%, and the 10-yr yield was unchanged at 1.52%. The U.S. Dollar Index rose 0.5% to 97.84.

[…]

• The ISM Manufacturing Index for January jumped to 50.9% (Briefing.com consensus 48.1%) from an upwardly revised 47.8% (from 47.2%) in December. January marked the first reading above 50% in six months.
o The key takeaway from the report is that the manufacturing sector went back into an expansion mode in January, aided by a jump in new orders, production, and new export orders.
• Total construction spending decreased 0.2% m/m in December (Briefing.com consensus +0.5%) on the heels of an upwardly revised 0.7% increase (from +0.6%) in November. Residential spending was up 1.4% m/m and nonresidential spending was down 1.2% m/m.
o The key takeaway from the report is that there was continued strength in new single-family construction (+2.7%), which was the main driver of the pickup in residential spending.