Market Remarks

Morning Notes – Wednesday, May 4, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are a bit higher at 9:15 AM; drifting lower since 7:15 AM high of 4191.00
  • The odds are for an up day with elevated volatility – watch for a break below 4167.75 for a change of fortunes
  • Key economic data report due during the day:
    • Trade Balance ( -109.8B vs. -10.3B est.; prev. -89.8B) at 8:30 AM
    • Final Services PMI ( 54.7 est.; prev. 58.30 ) at 9:45 Am
    • ISM Services PMI ( 58.5 est.; prev. 58.3) at 10:00 AM
    • FOMC Statement at 2:00 PM
    • Fed Funds Rate ( <1.0% est.; <0.5%) at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4153.55, 4127.74 and 4105.06
  • Critical resistance levels for S&P 500 are 4198.41, 4208.43, and 4232.00
  • Key levels for E-mini futures: break above 4191.00, the high at 7:15 AM and a break below 4167.75, the low at 3:15 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (June 2022) closed at 4170.25 and the index closed at 4175.48 – a spread of about -5.25 points; futures closed at 4169.25 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +9.75; Dow by +65; and NASDAQ by +21.25

Markets Around The World

  • Markets in the East closed lower – Shanghai and Tokyo were closed for trading
  • European markets are mostly lower – Germany is up
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.987%, up +7.4 basis points from two weeks ago;
    • 30-years is at 3.023%, up +3.3 basis points;
    • 2-years yield is at 2.731%, up +12.9 basis points;
    • The 10-Year-&-2-Year spread is at 0.256, down from 0.311
    • The 30-Year-&-10-Year spread is at 0.036, down from 0.077
  • VIX
    • At 28.98 @ 8:00 AM; down from the last close; below the 5-day SMA;
    • Recent high = 37.52 on March 8; low = 19.75 on April 20
    • Sentiment: Risk-On

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

Weekly:
  • The week ending on April 29 was a red candle with a small upper shadow and almost no lower shadow;
    • Stochastic (9,1, 3): %K is below %D; near zero
    • RSI-9 is near 30
  • The week was down -139.85 or -3.3%; the 5-week ATR  is 161.91
  • A down week; fourth in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4188.22, R1=4252.16, R2=4372.39; S1=4067.99, S2=4004.05; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A green Spinning Top candle with a small real body; three-day Morning Star pattern; still within the large red body of April 29
    • Stochastic (9, 1, 3): %K is above %D
    • RSI-9 is just above 35; above 8-day EMA; Bullish Divergence
  • Below 50-day EMA, 20-day EMA, 200-day SMA, and 100-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • The downtrend since 12:00 AM on March 30; lower highs and lower lows since April 21; broke below an upsloping flag – the 61.8% extension target near 4073.00 is achieved, the 100% extension target is near 3931.00, and the 161.8% extension target is near 3701.00
    • RSI-21 bounced up to above 50 after making Bullish Diveregcen at 12:00 PM on Monday
    • AboveEMA20 but below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sideways to up since 3:30 PM on Monday after bouncing up from a support level around 4060.00
    • RSI-21 is moving just above 50 after making a Bullish Divergence at 2:30 PM on Monday
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting sideways to up since 9:30 PM on May 2
  • The Bollinger Band is narrow and stable
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday, May 3, in lower volume.

Major indices opened up and mostly traded in a narrow range for the rest of the day. Most made Spinning Top candles with small real bodies that looked like Dojis. They are forming a three-day Morning Star pattern. Though all are within the large red body of April 29.

From Briefing.com:

The S&P 500 gained 0.5% on Tuesday in a session driven by the value stocks. The Dow Jones Industrial Average (+0.2%) and Nasdaq Composite (+0.2%) both increased 0.2% while the Russell 2000 outperformed with a 0.9% gain.

Nine of the 11 S&P 500 sectors closed higher, paced by the energy (+2.9%), financials (+1.3%), real estate (+1.3%), and materials (+1.1%) sectors with gains over 1.0%. The consumer staples (-0.2%) and consumer discretionary (-0.3%) sectors were the two holdouts.

[…]

The 2-yr yield increased three basis points to 2.76% in a curve-flattening trade that didn’t deter the bank stocks. The U.S. Dollar Index decreased 0.3% to 103.46.

[…]
  • Factory orders for manufactured goods increased 2.2% m/m in March (Briefing.com consensus +1.0%) following an upwardly revised 0.1% increase (from -0.5%) in February. Shipments of manufactured goods jumped 2.3% after increasing 1.1% in February.
  • […]
  • Job openings increased to 11.549 million in March from a revised 11.344 million (from 11.266 million) in February.
[…]
  • Dow Jones Industrial Average -8.8% YTD
  • S&P 500 -12.4% YTD
  • Russell 2000 -15.4% YTD
  • Nasdaq Composite -19.7% YTD
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