Market Remarks

Morning Notes – Thursday, October 27, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are a bit lower at 8:15 AM; moving lower since 1:30 AM from 3867.75 broke below a Double Top pattern – the 100% extension target near 3833.00 is almost achieved, and the 161.8% extension target is near 3822.00
  • The odds are for a down-to-sideways day with elevated volatility – watch for a break above 3860.00 for a change of sentiments
  • The key economic data report is due during the day:
    • ECB Main Refinancing Rate ( 2.0% vs. 2.0% est.; prev. 1.25%) at 8:15 AM
    • ECB Monetary  Policy Statement at 8:15 AM
    • Advance GDP ( 23% est. -0.6% ) at 8:30 AM
    • Advance GDP Price Index ( 5.3% est.; prev. 9.0%) at 8:30 AM
    • Core Durable Goods Orders ( 0.2% est.; prev. 0.3%) at 8:30 AM
    • Durable Goods Orders ( 0.6% est.; prev. -0.2% ) at 8:30 AM
    • Unemployment Claims ( 219K est.; prev. 214K) at 8:30 AM
    • ECB Press Conference at 8:45 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3824.07, 3791.71, and 3776.91
  • Critical resistance levels for S&P 500 are 3840.28, 383.41, and 3876.88
  • Key levels for E-mini futures: break above 3860.00, the high at 4:15 AM, and a break below 3831.50, the low of 8:45 AM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2022) closed at 3842.00, and the index closed at 3830.60 – a spread of about +11.50 points; the futures closed at 3841.00; the fair value is +1.00
  • Pre-NYSE session open, futures are mixed – at 7:45 AM, S&P 500 futures were down by -5.00, Dow up by -+192, and NASDAQ down by -71.50

Markets Around The World

  • Markets in the East closed mostly higher mixed – Shanghai and Tokyo closed lower
  • European markets are lower
  • Currencies (Compared to two weeks ago):
Up Down
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/USD
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are mixed
    • Industrial metals are mostly higher
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.015%, up +11.3 basis points from two weeks ago;
    • The 30-year is at 4.163%, up +27.9 basis points;
    • The 2-year yield is at 4.420%, up +13.3 basis points;
    • The 10-Year-&-2-Year spread is at -0.405, down from -0.385
    • The 30-Year-&-10-Year spread is at 0.148, up from -0.018
  • VIX
    • At 27.63 @ 6:30 AM; up from the last close; below the 5-day SMA;
    • Recent high = 34.88 on September 28; low = 25.42 on September 15
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on October 21 was a green candle with almost no upper and lower shadows; a three-week Morning Star is forming just below the support level around the low of June 13 week
    • Stochastic (9,1, 3): %K is above %D;
    • RSI-9 is above 40
  • The week was up +169.68 or +4.7%; the 5-week ATR  is 206.73
  • An up week; second in the last five weeks, and third in the previous ten weeks;
  • The weekly pivot point=3718.06, R1=3797.48, R2=3842.20; S1=3673.34, S2=3593.92; R1 pivot level was breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A Harami Gravestone Doji above a downtrend line from the August 16 high.
    • Stochastic (9, 1, 3): %K crossed below %D from near 100;
    • RSI-9 is just above 65; above 8-day EMA;
  • Above 20-day EMA and 50-day EMA; below 100-day SMA and 200-day SMA;
  • Uptrend Resumed
2-Hour (E-mini futures)
  • Broke above a Horizontal Channel between 3820.00 and 3570.00 after retreating to its middle – the 61.8% target s near 4004.36, and a 100% extension target is near 4119.25
      • RSI-21 has declined to just below 45 after making a couple of Bearish Divergences
      • Below EMA20, but above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Moving sideways to down since 1:00 PM on Wednesday, forming a Head-&-Shoulder pattern – the 61.8% extension target is near 3797.50, and the 100% extension target is near 3775.00
    • RSI-21 is drifting lower since 11:30 AM on Wednesday; near 40 from above 70
    • At/below EMA20, which is at/below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to down since 7:00 PM
  • The Bollinger Band is expanding a bit since 2:00 AM, with the price walking down the lower band
  • Bias:  Up-Side

Previous Session

Major U.S. indices closed mixed on Wednesday, October 26, in most higher volume. S&P 500, NASDAQ Composite, and Wilshire 5000 Total Market Index closed down. Dow Jones Transportation Average traded in lower volume. The major indices opened lower but then turned around and traded higher until Noon, when they tumbled over and declined for the rest of the day. Most formed reversal candles.

From Briefing.com:

The stock market had a choppy session today. The S&P 500 was above its 50-day simple moving average (3860.02) and up 0.7% at today’s high. It closed with a loss of 0.7%. The major averages were steered by price action in the mega cap stocks. […]

Roughly half of the 11 S&P 500 sectors closed with a gain, led by energy (+1.4%) amid rising oil prices. WTI crude oil futures rose 3.4% to $87.86/bbl.

Meanwhile, the communication services sector (-4.8%) was the worst performer by a wide margin, largely due to Alphabet and Meta Platforms (META 129.82, -7.69, -5.6%). Information technology (-1.1%) was another top laggard thanks to its mega cap components,

[…]

Small and mid cap stocks fared better than their larger peers today. The Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.2%) both logged a modest gain on the day.

[…]
  • Weekly MBA Mortgage Application Index -1.7%; Prior -4.5%
  • September Adv. Intl. Trade in Goods -$92.2 bln; Prior -$87.3 bln
  • September Adv. Retail Inventories 0.4%; Prior 1.4%
  • September Adv. Wholesale Inventories 0.8%; Prior was revised to 1.4% from 1.3%
  • September New Home Sales 603K (Briefing.com consensus 575K); Prior was revised to 677K from 685K
[…]

Dow Jones Industrial Average: -12.4% YTD
S&P Midcap 400: -15.9% YTD
S&P 500: -19.6% YTD
Russell 2000: -19.6% YTD
Nasdaq Composite: -29.9% YTD

Overseas: 

  • Europe: DAX +1.1%, FTSE +0.6%, CAC +0.4%
  • Asia: Nikkei +0.7%, Hang Seng +1.0%, Shanghai +0.8%

Commodities: 

  • Crude Oil +2.89 @ 87.86
  • Nat Gas +0.04 @ 5.66
  • Gold +10.60 @ 1669.20
  • Silver +0.13 @ 18.46
  • Copper +0.13 @ 3.53
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