Market Remarks

Morning Notes – Thursday, October 13, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM; they were higher at 8:30 AM but declined more than 140 points following the CPI report at 8:30 AM
  • The odds are for a down with elevated volatility
  • The key economic data report is due during the day:
    • CPI m/m ( 0.4% vs. 0.2% est.; prev. 0.1%) at 8:30 AM
    • Core CPI m/m ( 0.6% vs. 0.4% est.; prev. 0.6%) at 8:30 AM
    • CPY y/y ( 8.2% vs. 8.1% est.; prev. 8.3%) at 8:30 AM
    • Unemployment Claims ( 228K vs. 225K est.; prev. 219K) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3492.75, 3484.34, and 3462.71
  • Critical resistance levels for S&P 500 are 3511.91, 3537.78, and 3552.57
  • Key levels for E-mini futures: break above 3536.00, the high of 8:33 AM and a break below 3503.75, the low of 9:18 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2022) closed at 3587.50, and the index closed at 3577.03 – a spread of about +10.50 points; the futures closed at 3588.50; the fair value is -1.00
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -71.25, Dow by -516, and NASDAQ by -310.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • EUR/USD
  • AUD/USD
  • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.902%, up +33.3 basis points from two weeks ago;
    • The 30-year is at 3.884%, up +30.9 basis points;
    • The 2-year yield is at 4.287%, up +14.8 basis points;
    • The 10-Year-&-2-Year spread is at -0.249, up from -0.434
    • The 30-Year-&-10-Year spread is at -0.048, down from -0.024
  • VIX
    • At 33.27 @ 8:00 AM; down from the last close; above the 5-day SMA;
    • Recent high = 34.88 on September 28; low = 28.50 on October 5
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on October 7 was a Shooting Str candle, albeit after almost no advance; near a support level around the low of June 13 week
    • Stochastic (9,1, 3): %K crossed above %D; below ten
    • RSI-9 is just above 35
  • The week was down -180.15 or -4.7%; the 5-week ATR  is 212.40
  • An up week; second in the last five weeks, and fourth in the previous ten weeks;
  • The weekly pivot point=3683.83, R1=3762.74, R2=3885.81; S1=3560.76, S2=3481.85; R1/R2 pivot levels were breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A small red candle within the lower shadow of the previous day;
    • Stochastic (9, 1, 3): %K is below %D; below 10
    • RSI-9 is just above 30; below 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Declining since 2:00 PM on October 5; moved sideways to down from 4:00 PM on October 7 to 8:30 AM on October 13; broke below a Horizontal Channel between 3820.00 and 3570.00 – the 61.8% extension target is near 3419.00, and the 100% extension target is near 3325.00
    • RSI-21 has moved to around 25 from above 50
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Broke below after drifting sideways since 6:00 PM on October 9
    • RSI-21 has moved below 25 from above 50
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting down since 8:30 AM
  • The Bollinger Band is expanding since 4:15 AM, with the price walking down the lower band since 8:30 AM
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Wednesday, October 12, in lower volume. The major indices made Doji, Harami, or similar indecisive candlestick formations. Dow Jones Transportation Average closed higher.

The market opened up and then mostly traded sideways for most of the day before declining in the final half-hour of trading.

From Briefing.com:

[…]

The stock market opened to modest losses before the S&P 500 tested yesterday’s low, and the new low for 2022 (3568.45), where it found support from buyers. The major averages ultimately closed with losses, but little changed from the flat line.

[…]

The 10-yr note yield fell four basis points to 3.90% despite a disappointing 10-yr note auction and the 2-yr note yield fell one basis point to 4.29%.

[…]

Outsized gains in PepsiCo boosted the S&P 500 consumer staples sector (+0.5%) to second place on the day. Energy (+0.8%) sat in first place despite falling oil prices. WTI crude oil futures fell 2.2% to $87.22/bbl on festering concerns about a global growth slowdown.

On the flip side, the S&P 500 utilities (-3.4%) and real estate (-1.4%) sectors were the worst performers today.

[…]
  • Weekly MBA Mortgage Applications Index fell 2.0% compared to last week’s 14.2% decline.
  • PPI rose 0.4% in September (Briefing.com consensus 0.2%) following a revised 0.2% decline in August (from 0.1%). Core PPI, excluding foods and energy, rose 0.3% in September (Briefing.com consensus 0.3%) following a revised 0.3% increase in August (from 0.4%)
[…]

Dow Jones Industrial Average: -19.6% YTD
S&P Midcap 400: -20.7% YTD
S&P 500: -25.0% YTD
Russell 2000: -24.8% YTD
Nasdaq Composite: -33.4% YTD

Overseas: 

  • Europe: DAX -0.4%, FTSE -0.9%, CAC -0.3%
  • Asia: Nikkei -0.0%, Hang Seng -0.8%, Shanghai +1.5%

Commodities: 

  • Crude Oil -1.98 @ 87.22
  • Nat Gas -0.15 @ 6.45
  • Gold -1.20 @ 1684.40
  • Silver -0.37 @ 19.07
  • Copper -0.01 @ 3.42
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