Market Remarks

Morning Notes – Thursday, September 1, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; the September future declined from 3948.25 at 7:45 to a trading range between 3940.00 and 3921.00 that it broke above at 7:15 AM
  • The odds are for a down day with elevated volatility – watch for a break above 3948.25 for a change of sentiments
  • The key economic data report due during the day:
    • Unemployment Claims ( 232K vs. 250K est.; prev. 137K ) at 8:30 AM
    • Revised Nonfarm Productivity ( -4.1% vs. -4.3% est.; prev. -4.6%) at 8:30 AM
    • Revised Unit Labor Costs ( 10.0% vs. 10.8% est.; prev. 10.8%) at 8:30 AM
    • ISM Manufacturing PMI ( 52.1 est.; prev. 52.8) at 10:00 AM
    • Construction Spending ( -0.3% est.; prev. -1.1%) at 10:00 AM
    • ISM Manufacturing Prices ( 55.4 est.; prev. 60.0) at 10:00 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Uptrend Under Pressure
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min:  Side

Key Levels:

  • Critical support levels for S&P 500 are 3934.2, 3926.14, and 3910.74
  • Critical resistance levels for S&P 500 are 3954.53, 3982.31, 3995.46
  • Key levels for E-mini futures: break above 3948.25, the high at 7:45 AM and a break below 3921.00, the low at 4:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2022) closed at 3955.75, and the index closed at 3955.00 – a spread of about +0.75 points; the futures closed at 3956.50; the fair value is -0.75
  • Pre-NYSE session open, futures are lower – at 8:15 AM, S&P 500 futures were down by -25.75, Dow by -168, and NASDAQ by -114.75

Markets Around The World

  • Markets in the East closed mostly lower –  Singapore closed up
  • European markets are lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.248%, up +35.5 basis points from two weeks ago;
    • The 30-year is at 3.364%, up +21.8 basis points;
    • The 2-year yield is at 3.458%, up +17.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.210, up from -0.386
    • The 30-Year-&-10-Year spread is at 0.116, down from 0.253
  • VIX
    • At 26.57 @ 7:45 AM; down from the last close; above the 5-day SMA;
    • Recent high = 29.06 on July 13; low = 21.77 on August 25
    • Sentiment: Risk-Off

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

Weekly:
  • The red candle that gapped down with no lower and upper shadows;
    • Stochastic (9,1, 3): %K is below %D just above 50
    • RSI-9 is below 50
  • The week was down -170.82 or -4.0%; the 5-week ATR  is 152.61
  • A down week; second in the least five weeks and fourth in the previous ten weeks;
  • The weekly pivot point=4106.12, R1=4154.58, R2=4251.50; S1=4009.20, S2=3960.74; S1/S2/S3 pivot levels were breached
  • Above 10-week EMA, below 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A red candle with almost no lower shadow and a small upper shadow; the next support is at 3910.74
    • Stochastic (9, 1, 3): %K is crisscrossing %D below ten
    • RSI-9 is near 30; below 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Trending down since 2:00 PM on August 16; broke below a support level near 4110.00 and the neckline of a Head-&-Shoulder pattern – the 61.8% extension target near 3975.00 is achieved; the 100% extension target is near 3894.00, and the 161.8% extension target is near 3760.00;
    • RSI-21 is just above 30 after making a Bullish Divergence ner 20 at 10:00 PM
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Moving sideways since 7:30 PM within a downtrend; broke below a second upsloping flag on August 31 –  the 61.8% extension target near 3950.00 is achieved; the 100% extension target is near 3910.00
    • RSI-21 has risen above 40 from below 30
    • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting sideways since 12:30 AM
  • The Bollinger Band is expanding a bit since 7:45 AM – prices first walked up the upper band and then declined up to the middle band
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, August 31, in mixed volume. The major indices opened up but turned down immediately and then declined for most of the day. The decline increased in the final minutes of the NYSE session, along with the volume.

From Briefing.com:

[…]

Downside momentum picked up in the afternoon with the main indices closing near session lows.

[…]

At midday, decliners led advancers by an 11-to-10 margin at the NYSE and a barely greater than 1-to-1 margin at the Nasdaq. At the close, decliners led advancers by a greater than 2-to-1 margin at the NYSE and a 3-to-2 margin at the Nasdaq.

[…]

Ten of the 11 S&P 500 sectors closed in the red while communication services was flat.

[…]

Only two S&P 500 sector managed to hold onto gains for the month, utilities with a 0.1% gain and energy with a 2.2% gain.

Separately, energy complex futures settled mixed. WTI crude oil futures fell 2.4% to $89.41/bbl while natural gas futures rose 0.9% to $9.14/mmbtu.

The Treasury market was mixed with the 2-yr note yield falling two basis points to 3.44% while the 10-yr note yield rose two basis points to 3.13%. Treasury yields rose sharply on the month with the 2-yr note yield climbing 54 basis points while the 10-yr note yield rose 49 basis points.

[…]
  • Weekly MBA Mortgage Applications Index showed a 3.7% decline following the prior week’s 1.2% decrease
  • August ADP Employment Change Report showed an estimated 132,000 employees were added to private sector payrolls versus 270,000 in July based on ADP’s revised methodology
  • August Chicago PMI reading was 52.2 (Briefing.com consensus 53.1) after the prior reading of 52.1.
  • Weekly EIA Crude Oil Inventories showed a draw of 3.33 million barrels after last week’s draw of 3.28 million

Dow Jones Industrial Average: -13.9% YTD
S&P 400: -14.5% YTD
S&P 500: -17.0% YTD
Russell 2000: -17.9% YTD
Nasdaq Composite: -24.5% YTD

Overseas: 

  • Europe: DAX -1.0%, FTSE -1.1%, CAC -1.4%
  • Asia: Nikkei -0.4%, Hang Seng +0.0%, Shanghai -0.8%

Commodities: 

  • Crude Oil -2.19 @ 89.41
  • Nat Gas +0.08 @ 9.13
  • Gold -10.30 @ 1726.40
  • Silver -0.40 @ 17.91
  • Copper -0.03 @ 3.52
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