Market Remarks

Morning Notes – Tuesday, May 24, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; drifting up since 4:45 AM after making a Double Bottom at 3910.00
  • The odds are for a down day with elevated volatility; a good chance of a sideways to up move from the pre-open levels around 3930.00 – watch for a break below 3922.00 and a break above 3938.00 for clarity
  • The key economic data report due during the day:
    • Flash Manufacturing PMI ( 57.6 est.; prev.59.2) at 9:45 AM
    • Flash Services PMI ( 55.1 est.; prev. 55.6) at 9:45 AM
    • New Home Sales ( 751K est.; prev. 763K) at 10:00 AM
    • Richmond Manufacturing Index ( 9 est.; prev. 14) at 10:00 AM
    • Fed Chair Powell speak at 12:20 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 39333.34, 3909.04, and 3903.89
  • Critical resistance levels for S&P 500 are 3946.11, 3981.88, and 4013.73
  • Key levels for E-mini futures: break above 3938.50, the high at 7:30 AM and a break below 3922.00, the low at 8:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (June 2022) closed at 3972.00 and the index closed at 3973.75 – a spread of about -1.75 points; futures closed at 3971.75 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -44.00; Dow by -19; and NASDAQ by -217.50

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.812%, down -26.7 basis points from two weeks ago;
    • 30-years is at 3.011%, down -19.7 basis points;
    • 2-years yield is at 2.608%, up +0.2 basis points;
    • The 10-Year-&-2-Year spread is at 0.204, down from 0.473
    • The 30-Year-&-10-Year spread is at 0.199, up from 0.129
  • VIX
    • At 29.40 @ 8:00 AM; up from the last close; below the 5-day SMA;
    • Recent high = 35.48 on May 9; low = 25.51 on May 17
    • Sentiment: Risk-Off
    • 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 green candle with almost no upper and were shadows; a three-day Morning Star pattern
    • Stochastic (9, 1, 3): %K is above %D; Bullish Divergence
    • RSI-9 is just above 40; 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 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; within another Horizontal channel bounded between 4055.00 and 3856.00
    • RSI-21 is declined from around 65 at 2:00 PM on Monday to just above 40
    • At/below EMA20, at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Drifting sideways – between 3982.00 and 3906.50 – since 7:30 PM on Sunday after making a V-shaped move on Friday
    • RSI-21 is around 50
    • At/above EMA20, which is just below EMA10 of EMA50
  • Bias:  Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting down since 10:45 PM
  • The Bollinger Band is relatively stable and narrow
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Monday, May 23, in lower volume.

Most major indices made three-day Morning Stars patterns at support levels. Most gapped up at the open and then for most of the day traded higher. All S&P sectors closed higher.

From Briefing.com:

There were no Monday blues for the stock market. Instead, stock monitors were generally awash in green figures as market participants succeeded in maintaining the momentum of Friday’s late rebound effort. […]

The Russell 3000 Value Index was up 1.5% and the Russell 3000 Growth Index was also up 1.5%.

All 11 S&P 500 sectors closed in positive territory. The financial sector (+3.2%), bolstered by JPMorgan Chase’s guidance and some value hunting, led the way. It was joined at the top of the performance table by the energy (+2.7%), information technology (+2.4%), and consumer staples (+2.1%) sectors.

[…]

The 2-yr note yield settled up three basis points at 2.61% while the 10-yr note yield ended up seven basis points at 2.86%.

[…]

The U.S. Dollar Index fell 1.0% to 102.09. WTI crude futures settled the session up 0.2% at $110.31/bbl while natural gas futures spiked 7.9% to $8.84/mmbtu.

[…]
  • Dow Jones Industrial Average -12.0% YTD
  • S&P 500 -16.6% YTD
  • Russell 2000 -20.4% YTD
  • Nasdaq Composite -26.3% YTD

Overseas: 

  • Europe: DAX +1.4%, FTSE +1.7%, CAC +1.2%
  • Asia: Nikkei +1.0%, Hang Seng +0.0%, Shanghai -1.2%

Commodities: 

  • Crude Oil +0.25 @ 110.30
  • Nat Gas +0.65 @ 8.80
  • Gold +9.50 @ 1849.90
  • Silver +0.13 @ 21.68
  • Copper +0.06 @ 4.31
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