Market Remarks

Morning Notes – Monday, May 23, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; drifting sideways since 10:30 PM;
  • The odds are for an up day with elevated volatility; a good chance of a sideways to down move from the pre-open levels around 3935.00 – watch for a break below 3919.00 and a break above 3948.00 for clarity
  • No key economic data report is due during the day

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3903.89, 3878.67, and 3852.38
  • Critical resistance levels for S&P 500 are 3945.96, 3976.69, and 4013.73
  • Key levels for E-mini futures: break above 3948.00, the high at 7:00 AM and a break below 3919.00, the low at 5:45 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (June 2022) closed at 3898.25 and the index closed at 3901.36 – a spread of about -3.00 points; futures closed at 3899.50 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +31.00; Dow by +284; and NASDAQ by +45.75

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Sydney, and Seoul closed up; Hong Kong, Mumbai, and Singapore closed lower
  • European markets are mostly higher – Italy is down
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.787%, down -33.6 basis points from two weeks ago;
    • 30-years is at 2.996%, down -22.5 basis points;
    • 2-years yield is at 2.580%, down -11.6 basis points;
    • The 10-Year-&-2-Year spread is at 0.207, down from 0.427
    • The 30-Year-&-10-Year spread is at 0.209, up from 0.098
  • VIX
    • At 29.36 @ 8:30 AM; down from the last close; above the 5-day SMA;
    • Recent high = 35.48 on May 9; low = 25.51 on May 17
    • Sentiment: Risk-On
    • Forming a symmetrical triangle since April 25

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

Weekly:
  • The week ending on May 20 was a large red candle; the real body was complete within the lower shadow of the previous week’s candle; at the 38.2% Fibonacci retracement level of the rally from March 23, 2020 lows.
    • Stochastic (9,1, 3): %K crossed below %D; potential Bullish Divergence
    • RSI-9 is below 25
  • The week was down -122.53 or -3.0%; the 5-week ATR  is 243.90
  • A down week; seventh in succession and seventh in the previous ten weeks
  • The weekly pivot point=3934.13, R1=4057.95, R2=4214.53; S1=3777.55, S2=3653.73; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A Hammer candle with a small upper shadow; broke below recent 52-week lows but bounced up; a potential intra-day reversal candle
    • Stochastic (9, 1, 3): %K crossed above %D; potential Bullish Divergence
    • RSI-9 is just above 30; below 8-day EMA; potential 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 March 29; broke below a Horizontal Channel on May 8 – bounced up after almost reaching the 100% extension target near 3809, the 161.8% extension target is near 3650.00;
    • RSI-21 is rising; above 50 after making a BUllish DIvergence at 10:00 AM on May 20
    • At/above EMA20, at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Drifting sideways since 7:30 PM on Sunday after making a V-shaped move on Friday
    • RSI-21 is moving above 50
    • At/above EMA20, which is above EMA10 of EMA50
  • Bias:  Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 10:15 PM
  • The Bollinger Band is relatively stable but a bit expanded
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Friday, May 20, in mixed volume. NASDAQ Composite, Russell 2000, and Wilshire 5000 Total Market Index closed down.  Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume.

Major indices jumped up at the open but turned down in the first half-hour of trading. Most indices declined to new 52-week lows before turning around in the afternoon and recovering almost all of the day’s losses. Russell 2000 and NYSE Composite did not break below May 2022 lows.

For the week, major US indices closed lower in lower volume. The markets in Asia closed higher. European markets were mixed. The dollar index was down, energy futures were up, precious and industrial metals futures were up, and the soft commodities were mixed. The US Treasury yields closed down. All but three S&P sectors – Energy, Utilities, and Healthcare – closed down.

From Briefing.com:

The S&P 500 (+0.01%) closed fractionally higher on Friday, successfully digging itself out of bear market territory from earlier in the session, which is typically defined as a 20% decline from a recent high. The Dow Jones Industrial Average (+0.03%), Nasdaq Composite (-0.3%), and Russell 2000 (-0.2%) also closed on a better note. […]

All 11 S&P 500 sectors were trading lower, but a nice rebound transpired in the last hour of action with no specific news to account for the rally. Six of the 11 S&P 500 sectors closed in positive territory, including health care (+1.3%) and real estate (+1.2%) with gains over 1.0%.

[…]

The 2-yr yield fell three basis points to 2.58%, and the 10-yr yield fell seven basis points to 2.79%. The U.S. Dollar Index increased 0.3% to 103.10. WTI crude futures settled above $110.00 per barrel ($110.05, +0.14, +0.1%).

[..]
  • Dow Jones Industrial Average -14.0% YTD
  • S&P 500 -18.1% YTD
  • Russell 2000 -21.0% YTD
  • Nasdaq Composite -27.4% YTD
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