Market Remarks

Morning Notes – Thursday October 7, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:00 AM;
  • Futures are trending up since 5:30 AM on Wednesday
  • The odds are for an up day with elevated volatility – watch for a break above 4397.75 and a break below 4369.50 for more insights
  • Key economic data report due during the day:
    • Unemployment Claims ( 350K vs. 362K) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4375.19, 4345.76, and 4326.66
  • Critical resistance levels for S&P 500 are 4419.54, 4439.96, and 4453.85
  • Key levels for E-mini futures: break above 4397.75, the high of 7:30 AM and break below 4369.50, the low of 1:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2021) closed at 4353.50 and the index closed at 4363.55 – a spread of about -10.00 points; futures closed at 4354.00 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 8:00 AM, S&P 500 futures were up +41.00; Dow by +285; and NASDAQ by +177.00

Markets Around The World

  • Markets in the East closed higher – Shanghai was closed for trading;
  • European markets are higher;
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.524%, up +18.8 basis points from two weeks ago;
    • 30-years is at 2.076%, up +22.5 basis points;
    • 2-years yield is at 0.302%, up +6.0 basis points;
    • The 10-Year-&-2-Year spread is at 1.222, up from 1.094
  • VIX
    • At 20.49 @ 6:30 AM; down from the last close; below 5-day SMA;
    • Recent high =  28.79 on September 20; low =  17.65 on September 16
    • Sentiment: Risk-On

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

Monthly
  • September 2021 was a relatively large Bearish Engulfing with almost no upper and lower shadows; made all-time intra-month high;
    • Stochastic (9, 1, 3): %K turned below %D from near 100;
    • RSI-9 just below 70 from above 80; Bearish Divergence
    • Above the upper band of a 120-month regression channel;
  • Confirmed Uptrend: sequence of higher highs and higher lows
Weekly:
  • The week ending on October 1 was a Bearish Engulfing candle with a small upper shadow and a lower shadow that is half the size of the real body
    • Stochastic (9,1, 3): %K is below %D below 30;
    • RSI-9 is below 50
  • The week was down -98.44 or -2.2%; the 5-week ATR is 101.55
  • A down week; third in the last five weeks, and fifth in the last ten weeks
  • The weekly pivot point=4367.62, R1=4446.72, R2=4536.40; S1=4277.94, S2=4198.84; S1 pivot level was breached
  • Below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A Bullish Engulfing candle following a green Harami candle; with almost no upper shadow and small lower shadow;
    • Stochastic (9, 1, 3): %K is above %D; above 45
    • RSI-9 is above 45; above 8-day EMA; Bullish Divergence
  • Below 20-day EMA and 50-day EMA; at/above 100-day SMA; above 200-day SMA
  • Correction
2-Hour (E-mini futures)
  • Broke above a Symmetrical triangle – 61.8% extension target is near 4430.00 and the 100% extension target is near 4480.00
    • RSI-21 is near 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving up since 5:30 AM on Wednesday; broke above a Symmetrical triangle – 61.8% extension target is near 4420.00 and the 100% extension target is near 4460.00
    • RSI-21 is moving along 65
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up since 10:00 PM
  • The Bollinger Band is expanding since 6:30 AM with price walking up the upper band
    • Stochastic (9, 1, 3): %K crossed below %D at 7:30 AM
  • Bias:  Up-Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, October 6 in higher volume. Russell 2000 closed lower.

Major indices gapped down at the open but turned around in the first hour of trading and then after a choppy few hours traded higher in the afternoon. Most made bullish reversal candles. The sentiments turned bullish by the close.

From Briefing.com:

The S&P 500 gained 0.4% on Wednesday, overcoming an early 1.3% decline, as the market turned positive following news of a potential concession on the debt ceiling. The Nasdaq Composite (+0.5%) and Dow Jones Industrial Average (+0.3%) also recouped early losses to close higher, while the Russell 2000 fell 0.6%. […]

Nevertheless, eight of the 11 S&P 500 sectors closed higher after each traded lower in the morning. The defensive-oriented utilities (+1.5%), consumer staples (+1.0%), and real estate (+1.0%) sectors led the rebound effort with decent gains. The energy (-1.1%), materials (-0.3%), and health care (-0.2%) sectors closed lower.

[…]

the 10-yr yield settled lower by one basis point to 1.52% after peaking at 1.57% overnight.

[…]

WTI crude futures fell 1.9%, or $1.47, to $77.50/bbl. Natural gas futures fell 8.5% to $5.73/MMBtu. The U.S. Dollar Index increased 0.3% to 94.21.

[…]
  • ADP estimated that private sector payrolls increased by 568,000 in September (Briefing.com consensus 405,000) after increasing by a downwardly revised 340,000 (from 374,000) in August.
  • The weekly MBA Mortgage Applications Index fell 6.9% following a 1.1% decline in the prior week.
[…]
  • S&P 500 +16.2% YTD
  • Dow Jones Industrial Average +12.5% YTD
  • Nasdaq Composite +12.5% YTD
  • Russell 2000 +12.2% YTD

Overseas: 

  • Europe: DAX -1.5%, FTSE -1.2%, CAC -1.3%
  • Asia: Nikkei -1.1%, Hang Seng -0.6%, Shanghai closed for holiday

Commodities: 

  • Crude Oil -1.73 @ 77.37
  • Nat Gas -0.53 @ 5.73
  • Gold +0.50 @ 1762.60
  • Silver -0.07 @ 22.58
  • Copper -0.03 @ 4.16
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