Market Remarks

Morning Notes – Friday, July 22, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are a bit lower at 9:00 AM; rising since 3:30 AM – up more than 15 points
  • The odds are for an up to sideways day – watch for a break above 3988.75 for a change of sentiments
  • The key economic data report due during the day:
    • Flash Services PMI ( 47.0 vs. 52.6 est.; prev. 52.7) at 10:00 AM
    • Flash Manufacturing PMI ( 52.3 vs. 52.0 est.; prev. 52.7 ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3984.83, 3968.47, and 3950.93
  • Critical resistance levels for S&P 500 are 3998.85, 4017.17, and 4048.17
  • Key levels for E-mini futures: break above 4004.75, the high at 4:00 PM and a break below 3988.00, the low at 6:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2022) closed at 4002.75,  and the index closed at 3998.95 – a spread of about +3.75 points; the futures closed at 4001.25; the fair value is +1.50
  • Pre-NYSE session open, futures are mixed – at 9:00 AM, S&P 500 futures were down by -0.75, Dow up by +110; and NASDAQ down by -28.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Sydney, and Seoul closed down; Tokyo, Mumbai,  Hong Kong, and Singapore closed up
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • INR/USD
    • EUR/USD
    • USD/CHF
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 2.805%, down -20.3 basis points from two weeks ago;
    • The 30-year is at 3.005%, down -18.9 basis points;
    • The 2-year yield is at 3.100%, up +8.0 basis points;
    • The 10-Year-&-2-Year spread is at -0.295, up from -0.012
    • The 30-Year-&-10-Year spread is at 0.203, up from 0.186
  • VIX
    • At 22.92 @ 8:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 29.06 on July 13; low = 19.81 on April 21
    • Sentiment: Risk-On

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

Weekly:
  • The week ending on July 15 was a Haram Dragonfly Doji
    • Stochastic (9,1, 3): %K is above %D; around 40
    • RSI-9 is above 40 after making a Bullish Divergence on June 13
  • The week was down -36.22 or -0.9%; the 5-week ATR  is 212.85
  • A down week; third in the least five weeks and seventh in the previous ten weeks; 12 of the last 15 weeks were down
  • The weekly pivot point=3821.89, R1=3922.21, R2=3981.27; S1=3762.83, S2=3662.51; 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 shadow and a small lower shadow; broke above a symmetrical triangle  on July 19 – the 61.8% extension target is near 4070.00, the 100% extension target is near 4190.00, and the 161.8% extension target is near 4380.00;  the 100% extension target for the ABCD pattern is around 4025.00, and the 161.8% extension target is near 4216.00
    • Stochastic (9, 1, 3): %K is above %D; turning up above 90;
    • RSI-9 is near 70; above 8-day EMA;
  • Above 20-day EMA and 50-day EMA; below 200-day SMA and 100-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Drifting up since 8:00 AM on July 20; broke above a Descending Triangle on July 19 – the 61.8% extension target is near 4025.00, the 100% extension target is near 4105.00, and the 161.8% extension target is near 4235.00
    • RSI-21 is near 70
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting sideways to up since 3:00 PM on July 21 in a cup pattern
    • RSI-21 is also forming a cup pattern; just above 60
    • Above EMAS20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting up since 2:45 AM
  • The Bollinger Band is expanding a bit with price walking the upper band
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly higher on Thursday, July 21, in mostly lower volume. Dow Jones Transportation Average traded lower in higher volume. The major indices opened lower but turned around in the first hour and then mostly traded higher for the rest of the day.

From Briefing.com:

[…]

The S&P 500, which flirted with 3,600 in mid-June, closed a whisker shy of 4,000.

[…]

The Bank of Japan lowered its 2022 GDP growth forecast to 2.4% from 2.9% and the ECB announced a larger-than-expected 50-basis point increase for its key lending rates.

[…]

Small and mid cap stocks underperformed on the day with the Russell 2000 (+0.1%) and the S&P Mid Cap 400 (+0.6%) closing behind the broader market.

[…]

WTI crude oil futures settled the session down 3.4% to $96.49/bbl. Natural gas futures fell 1.2% to $7.79/mmbtu. Unleaded gasoline futures fell 3.7% to $3.15/gal.

[…]

The 2-yr note yield closed down 15 basis points at 3.09% while the 10-yr note yield fell 13 basis points to 2.91%.

[…]
  • Weekly Initial Claims 251K (Briefing.com consensus 240K); Prior 244K; Weekly Continuing Claims 1.384 mln; Prior was revised to 1.333 mln from 1.331 mln
  • […]
  • July Philadelphia Fed Index -12.3 (Briefing.com consensus -1.2); Prior -3.3
  • June Leading Economic Index -0.8% (Briefing.com consensus -0.5%); Prior was revised to -0.6% from -0.4%
  • Weekly EIA Natural Gas Inventories showed a build of 32 bcf vs a build of 58 bcf last week
[…]
  • Dow Jones Industrial Average: -11.4% YTD
  • S&P 400: -14.9% YTD
  • S&P 500: -16.1% YTD
  • Russell 2000: -18.2% YTD
  • Nasdaq Composite: -22.9% YTD

Overseas: 

  • Europe: DAX -0.3%, FTSE +0.1%, CAC +0.3%
  • Asia: Nikkei +0.4%, Hang Seng -1.5%, Shanghai -1.0%

Commodities: 

  • Crude Oil -3.37 @ 96.49
  • Nat Gas -0.09 @ 7.78
  • Gold +11.40 @ 1712.40
  • Silver +0.06 @ 18.65
  • Copper -0.02 @ 3.28
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