Morning Notes – Monday February 1, 2021

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with high volatility; good chance of sideways to down move from pre-open levels around 3735.00 – watch for a break below 3715.25 and break above 3751.50 for clarity
  • Key economic data report due during the day:
    • ISM Manufacturing PMI ( 60.0 est.; prev. 60.7) at 10:00 AM
    • Construction Spending ( 0.8% est.; prev. 0.9%) at 10:00 AM
    • ISM Manufacturing Prices ( 72.0 est.; prev, 77.6) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3735.13, 3711.45, and 3694.12
  • Critical resistance levels for S&P 500 are 3742.35, 3768.84, and 3785.32
  • Key levels for E-mini futures: break above 3752.25, the high of 6:00 AM and break below 3715.25, the low of 2:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (March 2021) closed at 3705.00 and the index closed at 3714.24 – a spread of about -9.25 points; futures closed at 3705.25 for the day; the fair value is -0.25
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +31.50; Dow by +219, and NASDAQ by +140.50

Markets Around The World

  • Markets in the East closed mostly higher – Singapore was down
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • AUD/USD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are mixed
    • Precious metals are mixed
    • Industrial metals are lower
    • Most soft commodities are mixed
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.076%, down 2.1 BP from two weeks ago;
    • 30-years is at 1.838%, down 1.5 BP;
    • 2-years yield is at 0.109%, down 2.0 BP;
    • The 10-Year-&-2-Year spread is at 0.967, down from 0.968
  • VIX
    • At 31.20 @ 8:00 AM; down from the last close; above 5-day SMA;
    • Recent high =  37.51 on January 29; low =  21.09 on January 21
    • Sentiment: Risk-On-Neutral

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

Monthly
  • Confirmed Uptrend
  • December 2020 was a green candle with a small gap and with almost no upper and lower shadows; all-time closing and intraday highs;
    • Stochastic %K above %D near 100;
    • RSI-9 above 70; broke above a downtrend line from January 2018
    • Above the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on January 29 was a large Bearish Engulfing candle from all-time highs with small upper and almost lower shadows;
    • Stochastic (9,1, 3): %K is below %D; below 50
    • RSI (9) is near 55 after making Bearish Divergence
  • The week was down -127.23 or -3.3%; the 5-week ATR is 113.23
  • A down week; second in the last five weeks and fourth in the last ten weeks
  • The weekly week pivot point=3759.75, R1=3825.39, R2=3936.53; S1=3648.61, S2=3583.97; S1/S2/S3 pivot levels were breached
  • At/below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A large red candle that opened lower; second leg down; at the open with a small lower shadow and no upper shadow; broke below January 6 low; erased all gains of the year
    • Broke above a symmetrical triangle at 3550.00 level on November 9; the 61.8% extension target near 3750.00 is achieved; 100% extension target is near 3900.00
    • %K  is below %D and near 10;
    • RSI-9 is below 40; below 8-day EMA
  • Below 20-day EMA; at/above 50-day EMA; above 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Bouncing up since 6:00 PM from a swing low – 3652.50, the low of January 4 – to near 3740.00; trending down since 8:00 AM on January 26 in steps;
    • RSI-21 is above 50 after making a Bullish Divergence at 6:00 PM
  • At/above EMA20 but below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (E-mini futures)
    • Bounced up from last week’s lows to within a congestion area between 3775.00 and 3700.00
      • RSI-21 is above 50
      • %K is crisscrossing %D lower
      • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 10:15 PM;
  • The Bollinger Band is relatively stable but also narrowing a bit
    • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Friday, January 29 in mostly higher volume. Major indices opened lower and then mostly traded down for rest of the day. Indices made 10+ days lows and gave up most of the gains of the month. All S&P sectors closed down.

For the week, major indices closed lower in higher volume. All S&P sectors were down. Markets in Europe and Asia also closed lower. The dollar index was up, but crude oil, gold, and industrial metals were down. The US Treasury yields were down.

From Briefing.com:

The S&P 500 fell 1.9% on Friday, as the continuation of the short-squeeze mania wore out investors and fed into concerns about fund managers selling long positions to cover their shorts. The Nasdaq Composite declined 2.0%, the Dow Jones Industrial Average declined 2.0%, and the Russell 2000 declined 1.6%.

[…]

Interestingly, longer-dated Treasuries traded lower despite the weakness in equities, which was symptomatic of cash-raising efforts. The 2-yr yield decreased one basis point to 0.11%, while the 10-yr yield increased four basis points to 1.09%. The U.S. Dollar Index increased 0.1% to 90.55. WTI crude futures decreased 0.2%, or $0.12, to $52.18/bbl.

[…]
  • Personal income increased 0.6% m/m in December (Briefing.com consensus 0.1%) and personal spending declined 0.2% (Briefing.com consensus -0.5%). The PCE Price Index was up 0.4% m/m (Briefing.com consensus 0.3%) and the core PCE Price Index was up 0.3% (Briefing.com consensus 0.1%), leaving the yr/yr rates at 1.3% and 1.5%, respectively.
  • […]
  • The Q4 Employment Cost Index increased 0.7% (Briefing.com consensus 0.5%), seasonally adjusted, for the three-month period ending in December 2020 after increasing 0.5% for the three-month period ending September 2020. Wages and salaries, which account for about 70% of compensation costs, rose 0.9%, while benefit costs, which make up the remainder of compensation costs, increased 0.6%.
  • […]
  • The final January reading for the University of Michigan Index of Consumer Sentiment checked in at 79.0 (Briefing.com consensus 79.2) versus the preliminary reading of 79.2 and the final reading of 80.7 for December.
  • […]
  • Pending home sales decreased 0.3% m/m in December (Briefing.com consensus -0.5%) following a revised 2.5% decline in November (from -2.6%).
  • The Chicago PMI for January increased to 63.8 (Briefing.com consensus 58.0) from a downwardly revised 58.7 in December (from 59.5).
[…]
  • Russell 2000 +5.0% YTD
  • Nasdaq Composite +1.4% YTD
  • S&P 500 -1.1% YTD
  • Dow Jones Industrial Average -2.0% YTD
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