Market Remarks

Morning Notes – Thursday, June 2, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are a bit lower at 9:00 AM; moving sideways to dows since 3:15 AM
  • The odds are for a down to sideways day with elevated volatility – watch for a break below 4092.00 and a break above 4124.50 for clarity
  • The key economic data report due during the day:
    • Unemployment Claims ( 200K vs. 210K est.; prev. 211K) at 8:30 AM
    • Revised Nonfarm Productivity ( -7.3% vs. -7.5% est.; prev. -7.5%) at 8:30 AM
    • Revised Unit Labor Costs ( 12.6 % vs. 11.6% est.; prev. 11.6%) at 8:30 AM
    • Factory Orders ( 0.8% est.; prev. 2.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4073.85, 4050.90, and 3981.16
  • Critical resistance levels for S&P 500 are 4127.85, 4155.17, and 4168.34
  • Key levels for E-mini futures: break above 4124.50, the high at 6:45 AM and a break below 4092.50, the low at 1:15 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2022) closed at 4098.25 and the index closed at 4101.23 – a spread of about -3.00 points; futures closed at 4099.00 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are mixed – at 9:00 AM, S&P 500 futures were down by 3.00; Dow up by +7; and NASDAQ down by -38.00

Markets Around The World

  • Markets in the East closed mostly lower – Shanghai and Mumbai closed higher
  • European markets are mostly higher – the U.K. is lower
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.931%, up +4.5 basis points from two weeks ago;
    • 30-years is at 3.076%, up +0.4 basis points;
    • 2-years yield is at 2.650%, down -3.2 basis points;
    • The 10-Year-&-2-Year spread is at 0.281, down from 0.204
    • The 30-Year-&-10-Year spread is at 0.145, up from 0.186
  • VIX
    • At 25.64 @ 8:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 35.48 on May 9; low = 24.94 on May 4
    • Sentiment: Risk-Neutra-On
    • Broke below a symmetrical triangle

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

Weekly:
  • The week ending on May 27 was a large green candle that formed a three-day Morning Star pattern; bouncing off from the 38.2% Fibonacci retracement level of the rally from March 23, 2020 lows.
    • Stochastic (9,1, 3): %K crossed above %D; Bullish Divergence
    • RSI-9 is just above 40
  • The week was up +256.88 or +6.6%; the 5-week ATR  is 251.51
  • An up week; first in the least five weeks and third in the previous ten weeks
  • The weekly pivot point=4063.95, R1=4252.78, R2=4347.31; S1=3969.42, S2=3780.59; R1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A Bearish Engulfing candle; the past two days’ price-action is within the real body of May 27; finding resistance at around 4160.00, the lows of June 18, 2021
    • Stochastic (9, 1, 3): %K crossed below %D; above 80
    • RSI-9 declined to just above 50 from above 60; above 8-day EMA;
  • Above 20-day EMA; below 50-day EMA, 200-day SMA, and 100-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • Broke the sequence of lower highs and lower lows since March 29; broke above a Horizontal channel bounded between 4055.00 and 3856.00 – the 61.8% extension target is near 4195.00 and the 100% extension target is near 4275.00
    • RSI-21 declined from a high near 90 on May 30 to around 45
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting down to sideways since 5:30 AM on May 30
    • RSI-21 is moving just below 50
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting up since 9:30 PM
  • The Bollinger Band is expanding since 8:30 AM with price walking down the lower band
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, June 1, in mostly lower volume. NASDAQ Composite traded in higher volume. Major indices opened lower and then traded down in the morning session before turning around in the afternoon and recovering. The past two days’ price-action is mostly within the large green real body of May 27, the day before the Memorial Day holiday.

From Briefing.com:

The stock market ended Wednesday on a weak note with the major averages finishing near yesterday’s lows. The S&P 500 lost 0.8% while the Russell 2000 (-0.5%) finished a bit ahead despite lagging in morning trade. […]

The financials sector (-1.7%) underperformed throughout the day after rallying off a 13-month low at the end of May.

[…]

Elsewhere among cyclical sectors, industrials (-0.6%) and the consumer discretionary space (-0.8%) finished near the S&P 500 while the technology sector (-0.3%) ended just below its flat line after reclaiming a chunk of its opening loss.

[…]

Chipmakers failed to keep pace with the sector, sending the PHLX Semiconductor Index lower by 1.6%.

Health care (-1.4%) and consumer staples (-1.3%) finished near the bottom of the leaderboard due to broad-based losses.

[…]

The 2-yr yield rose 11 bps to 2.65% while the 10-yr yield rose nine basis points to 2.93%.

[…]
  • The May ISM Manufacturing Index increased to 56.1% (Briefing.com consensus 54.9%) from 55.4% in April. A number above 50.0% is indicative of expansion. May marked the 24th consecutive month of expansion in the manufacturing sector, although the May reading was the second lowest since September 2020.
  • […]
  • Total construction spending increased 0.2% month-over-month in April (Briefing.com consensus 0.6%) following an upwardly revised 0.3% increase (from 0.1%) in March. Total private construction increased 0.5% month-over-month while total public construction decreased 0.7%. On a year-over-year basis, total construction spending was up 12.3%.
  • […]
  • Job openings decreased to 11.400 mln in April from a revised 11.855 mln (from 11.549 mln) in March.
  • The IHS Markit Manufacturing PMI fell to 57.0 in the final reading for May from 57.5 in the preliminary reading.
  • The weekly MBA Mortgage Index fell 2.3% after falling 1.2% during the previous week.
[…]
  • Dow Jones Industrial Average -9.7% YTD
  • S&P 400 -12.1% YTD
  • S&P 500 -14.0% YTD
  • Russell 2000 -17.4% YTD
  • Nasdaq Composite -23.3% YTD

Overseas: 

  • Europe: DAX -0.3%, FTSE -1.0%, CAC -0.8%
  • Asia: Nikkei +0.7%, Hang Seng -0.6%, Shanghai -0.1%

Commodities: 

  • Crude Oil +0.40 @ 115.33
  • Nat Gas +0.49 @ 8.69
  • Gold +4.10 @ 1851.70
  • Silver +0.28 @ 21.93
  • Copper +0.04 @ 4.33
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