Market Remarks

Morning Notes – Thursday, May 26, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:45 AM; up more than 30 points since 2:00 AM in the up-down move;
  • The odds are for an up day with elevated volatility – watch for a break below 3968.00 for a change of sentiments
  • The key economic data report due during the day:
    • Prelim GDP ( -1.5% vs. -1.3%; prev. -1.4% ) at 8:30 AM
    • Unemployment Claims ( 210K vs. 217K est.; prev. 218K) at 8:30 AM
    • Prelim GDP Prices ( -1.0%; prev. -0.4% ) at 8:30 AM
    • Pending Home Sales (-3.9% vs. 1.9% est.; prev. -1.6%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3970.01, 3932.32, and 3892.83
  • Critical resistance levels for S&P 500 are 3999.33, 4026.75, and 4051.98
  • Key levels for E-mini futures: break above 4009.00, the high at 7:30 AM and a break below 3968.00, the low at 4:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2022) closed at 3979.00 and the index closed at 3978.73 – a spread of about +0.25 points; futures closed at 3976.75 for the day; the fair value is +2.25
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +25.25; Dow by +219; and NASDAQ by +44.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Mumbai, and Singapore closed up; Hong Kong, Tokyo, Sydney, and Seoul closed down
  • European markets are higher – Switzerland is closed
  • 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 mixed
    • Industrial metals are mostly lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.736%, down -18.5 basis points from two weeks ago;
    • 30-years is at 2.982%, down -6.2 basis points;
    • 2-years yield is at 2.296%, down -12.7 basis points;
    • The 10-Year-&-2-Year spread is at 0.240, down from 0.298
    • The 30-Year-&-10-Year spread is at 0.246, up from 0.123
  • VIX
    • At 28.33 @ 6:30 AM; down from the last close; below 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 Bullish engulfing candle green candle with almost no lower shadow and a small upper shadow;
    • Stochastic (9, 1, 3): %K is above %D; above 55
    • RSI-9 is above 40; above 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 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; rising since 12:00 PM on May 20; more than halfway within another Horizontal channel bounded between 4055.00 and 3856.00
    • RSI-21 is rising in steps since 4:00 PM on May 18; above 65
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Trending up since 1:30 PM on May 20 after making a V-shaped move
    • RSI-21 is around 60
    • Above EMA20, which is above EMA10 of EMA50
  • Bias:  Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is trending up since 9:45 AM on Wednesday
  • The Bollinger Band is expanding a bit
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Wednesday, May 25, in mixed volume. S&P 500 and Russell 2000 Traded in higher volume.

Major indices opened higher and then moved further up in the morning trade before declining in the early afternoon. They again moved after in the late afternoon and closed near the highs for the day.

From Briefing.com:

[…]

The Russell 2000 increased 2.0% and the S&P Midcap 400 Index increased 1.9% versus gains of 1.0% for the S&P 500 and 0.6% for the Dow Jones Industrial Average.

[…]

That interest was evident in the advance-decline line, which favored advancing issues by a nearly 4-to-1 margin at the NYSE and a better than 2-to-1 margin at the Nasdaq.

[…]

Most sectors ended today higher. The lone laggards were the utilities (-0.06%) and industrials (-0.02%) sectors. The energy (+2.0%) and information technology (+1.2%) sectors fell in line behind the consumer discretionary sector as the best-performing sectors. Gains for the remaining sectors ranged from 0.04% to 0.9%.

[…]
  • The conditions for durable goods orders proved to be reasonably good in April, if not altogether as strong as expected. New orders for durable goods increased 0.4% month-over-month (Briefing.com consensus 0.6%) while new orders for durable goods, excluding transportation, rose 0.3% month-over-month (Briefing.com consensus 0.6%).
  • […]
  • Total applications declined 1.2% week-over-week, with purchase applications flat and refinancing applications down 2.0%
[…]
  • Dow Jones Industrial Average -11.5% YTD
  • S&P 500 -16.5% YTD
  • S&P 400 -14.6% YTD
  • Russell 2000 -19.9% YTD
  • Nasdaq Composite -26.9% YTD

Overseas: 

  • Europe: DAX +0.6%, FTSE +0.5%, CAC +0.7%
  • Asia: Nikkei -0.3%, Hang Seng +0.3%, Shanghai %

Commodities: 

  • Crude Oil +0.66 @ 110.60
  • Nat Gas +0.07 @ 8.91
  • Gold -19.10 @ 1845.60
  • Silver -0.19 @ 21.87
  • Copper -0.04 @ 4.26
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