Market Remarks

Morning Notes – Thursday, May 11, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM – declining since 5:15 AM – down more than 30 points to around 4140.00
  • The odds are for a down day with elevated volatility – watch for a break above 4158.25 for a change of sentiments
  • The major economic data reports due during the day:
    • PPI m/m ( 0.2% vs. 0.3% est.; prev. -0.4% ) at 8:30 AM
    • Core PPI m/m ( 0.2% vs. 0.2% est.; prev. 0.0%) at 8:30 AM
    • Unemployment Claims ( 264K vs. 245K est.; prev. 242K ) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4117.36, 4099.05, and 4084.73
  • Critical resistance levels for S&P 500 are 4136.29, 4147.32, and 4154.28
  • The key levels for E-mini futures are 4158.25, the high at 8:30 PM on May 3, and 4130.50, the low at 2:15 PM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2023) closed at 4152.50, and the index closed at 4137.64 – a spread of about +14.75 points; the futures closed at 4152.00; the fair value is +0.50
  • Pre-NYSE session open, futures were mixed – at 9:00 AM, S&P 500 futures were down by -14.25, Dow down by -204, and NASDAQ up by +6.75

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo closed higher
  • European markets are mostly lower – Switzerland is 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 higher
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.353, down -7.9 basis points from two weeks ago;
    • The 30-year is at 3.725%, up 3.6 basis points;
    • The 2-year yield is at 3.916%, down -2.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.563, down from -0.513
    • The 30-Year-&-10-Year spread is at 0.372, up from +0.257
  • VIX
    • At 17.29 @ 8:30 AM; up from the last close; at/above the 5-day SMA;
    • Recent high = 21.23 on May 4; low = 15.53 on May 1
    • Sentiment: Risk-Neutral-Off

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

Weekly:
  • The week ending on May 5 as a small red candle with almost a long lower shadow and a small upper shadow, breaking above the upper bound of a symmetrical triangle
    • Stochastic (9,1, 3): %K is below the %D;
    • RSI-9 is just below 60
  • The week was down -33.23 or -0.8%; the 5-week ATR  is 93.78
  • A down week, third in the last five weeks, and fourth in the previous ten weeks;
  • The weekly pivot point=4123.82, R1=4199.35, R2=4262.46; S1=4060.71, S2=3985.18; S1 pivot level was breached
  • Above 10-week EMA and 39-week SMA; below 89-week SMA
  • Uptrend
Daily
  • A small long-legged Doji above the high of a relatively large green candle on Friday following a couple of Dojis.
    • Stochastic (9, 1, 3): %K crossed above the %D;
    • RSI-9 turned up to above 50; above 8-DMA
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Moving sideways to down in the upper half of a Horizontal Channel between 4205.00 and 4060.00 that has been forming since March 30
    • RSI-21 has declined to below 50 from above 65
    • At EMA10 of EMA50, whichis below EMA20 
  • Bias:  Side-Down
30-Minute (E-mini futures)
  • Moving sideways to down since 3:30 PM on May 10 – broke below a sideways move around 4165.00 at 5:30 AM.
    • RSI-21 has declined to below 40 from near 60
    • Below EMA 20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving down since 6:45 AM.
  • The Bollinger Band has been expanding since 6:45 AM, with the price walking down the lower band.
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mixed on Wednesday, May 10, in higher volume. Dow Jones Industrial Average, Dow Jones Transportation Average, and NYSE Composite closed lower. S&P 500, NASDAQ Composite, Russell 2000, and Wilshire 5000 Total Market Index closed higher.

The major indices gapped up at the open but turned around and traded lower unlit early afternoon. They then turned up and moved higher, and mostly closed near their day’s highs.

From Briefing.com:

[…]

Ultimately, the Nasdaq and S&P 500 closed comfortably above unchanged levels. Mega cap stocks offered integral support to the broader market, leaving the Vanguard Mega Cap Growth ETF (MGK) up 1.1% while the Invesco S&P 500 Equal Weight ETF (RSP) closed flat and the market-cap weighted S&P 500 rose 0.5%.

[…]

Still, the S&P 500 financials sector (-0.6%) closed near the bottom of the pack, along with industrials (-0.3%). The energy sector (-1.2%) saw the biggest decline as oil prices fell due to growth concerns. WTI crude oil futures fell 1.6% to $72.56/bbl.

The communication services sector (+1.7%) was the best performer by a decent margin thanks to the gain in Alphabet. The information technology (+1.2%) and real estate (+1.0%) sectors were also top performers.

Treasuries settled with gains across the curve. The 2-yr note yield fell 10 basis points to 3.90% and the 10-yr note yield fell eight basis points to 3.44%.

  • Nasdaq Composite: +17.6% YTD
  • S&P 500: +7.8% YTD
  • Dow Jones Industrial Average: +1.2% YTD
  • S&P Midcap 400: +0.8% YTD
  • Russell 2000: -0.1% YTD
[…]
  • The weekly MBA Mortgage Applications Index rose 6.3% with refinancing applications jumping 10% and purchase applications rising 5%.
  • Total CPI was up 0.4% month-over-month (Briefing.com consensus +0.4%) and up 4.9% year-over-year, versus up 5.0% in March. Core-CPI, which excludes food and energy, was also up 0.4% month-over-month (Briefing.com consensus +0.3%) and up 5.5% year-over-year, versus up 5.6% in March.
  • The index for shelter (+0.4%) was the largest contributor to the increase in total CPI and core-CPI; however, the 0.4% increase was the smallest increase for the shelter index since January 2022.
  • […]
  • The weekly EIA crude oil inventories data showed a build of 2.95 million barrels after last week’s draw of 1.28 million barrels.
  • The April Treasury Budget showed a surplus of $176.2 billion compared to a surplus of $308.2 billion in the same period a year ago. The Treasury Budget data is not seasonally adjusted so the April 2023 figure cannot be compared to the March 2023 figure. The surplus in April was the result of receipts ($638.5 billion) exceeding outlays ($462.3 billion).
[…]
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