Market Remarks

Morning Notes – Tuesday, May 10, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:45 AM; making a cup-like pattern;
  • The odds are for an up day with elevated volatility – watch for a break below 3999.25 for a change of sentimentsclarity
  • No key economic data report is due during the day

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4005.90, 3975.48, and 3948.78
  • Critical resistance levels for S&P 500 are 4034.00, 4050.21, and 4081.27
  • Key levels for E-mini futures: break above 4045.00, the high at 12:00 PM on Monday and a break below 3999.25, the low at 11:15 PM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (June 2022) closed at 3987.25 and the index closed at 3991.24 – a spread of about -4.00 points; futures closed at 3987.50 for the day; the fair value is -0.25
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +36.50; Dow by +243; and NASDAQ by +194.75

Markets Around The World

  • Markets in the East closed mostly lower – Shanghai closed higher;
  • European markets are higher
  • 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 higher
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 3.003%, up +17.7 basis points from two weeks ago;
    • 30-years is at 3.135%, up +24.1 basis points;
    • 2-years yield is at 2.606%, down -11.6 basis points;
    • The 10-Year-&-2-Year spread is at 0.397, up from 0.104
    • The 30-Year-&-10-Year spread is at 0.132, up from 0.068
  • VIX
    • At 33.56 @ 8:00 AM; down from the last close; above the 5-day SMA;
    • Recent high = 36.64 on May 2; low = 24.94 on May 4
    • Sentiment: Risk-Neutral-On

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

Weekly:
  • The week ending on May 6 was a Doji candle with an upper shadow more than two-and-half times the lower shadow making it a bearish formation
    • Stochastic (9,1, 3): %K turning up from near zero; below %D;
    • RSI-9 is just above 30
  • The week was down -8.59 or -0.2%; the 5-week ATR  is 185.00
  • A down week; fifth in the last five weeks, and seventh in the previous ten weeks
  • The weekly pivot point=4164.50, R1=4266.50, R2=4409.65; S1=4021.35, S2=3919.35; R1/S1 pivot levels were breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A large red candle following a Doji candle;
    • Stochastic (9, 1, 3): %K is below %D near zero;
    • RSI-9 is at 30; below 8-day EMA
  • 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 a Horizontal Channel bounded by 4303.75 and 4056.00 – the 61.8% extension target is near 3903.00, the 100% extension target is near 3809, and the 161.8% extension target is near 3650.00
    • RSI-21 bounced up to 45 from 13 at 12:00 PM on Monday
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down; bouncing up since 8:00 PM on Monday from a low of 3961.75
    • RSI-21 is around 50 after making a Bullish Divergence at 8:00 PM
    • Abobe EMA20 but below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting higher since 9:15 PM
  • The Bollinger Band is relatively narrow
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday, May 9, in mostly higher volume. NASDAQ Composite traded in lower volume.

The major indices gapped down at the open and after declining in early trading they stabilized only to continue their decline near the close of the day’s trading.

From Briefing.com:

The S&P 500 fell 3.2% on Monday, closing below the 4,000 level in a broad-based retreat led by the growth stocks. The Nasdaq Composite (-4.3%) and Russell 2000 (-4.2%) both fell more than 4.0% while the Dow Jones Industrial Average outperformed on a relative basis with a 2.0% decline. […]

Ten of the 11 S&P 500 sectors closed lower with selling interest accelerating in the last 45 minutes of action.

The energy sector (-8.3%) was the worst performer, falling 8% as weaker oil prices ($103.43/bbl, -6.57, -6.0%) contributed to some profit-taking activity in the space. The biggest drags on the market, though, were the information technology (-3.9%) and consumer discretionary (-4.3%) sectors. The consumer staples sector (+0.1%) eked out a gain.

[…]

Away from equities, the Treasury market attracted some buying interest amid the carnage in stocks. The 10-yr yield, which hit 3.20% overnight, backed down to 3.05% by the settlement (down four basis points). The 2-yr yield declined six basis points to 2.60% after hitting 2.73% overnight. The U.S. Dollar Index was little changed at 103.70.

Monday’s economic data was limited to Wholesale Inventories for March, which increased 2.3% m/m in March (Briefing.com consensus 2.3%) following a revised 2.8% increase (from 2.5%) in February.

[…]
  • Dow Jones Industrial Average -11.3% YTD
  • S&P 500 -16.3% YTD
  • Russell 2000 -21.5% YTD
  • Nasdaq Composite -25.7% YTD

Overseas: 

  • Europe: DAX -2.2%, FTSE -2.3%, CAC -2.8%
  • Asia: Nikkei -2.5%, Hang Seng market closed, Shanghai +0.1%

Commodities: 

  • Crude Oil -6.57 @ 103.43
  • Nat Gas -0.98 @ 7.10
  • Gold -28.60 @ 1854.40
  • Silver -0.57 @ 21.73
  • Copper -0.05 @ 4.17
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