Market Remarks

Morning Notes – Wednesday, May 24, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM. Futures have been moving down since 5:00 AM – down more than 30 points.
  • The odds are for a down day with elevated volatility and with a good chance of a bounce from the pre-open level around 4140.00 – watch for a break above 4157.75 for a change of sentiments.
  • The major economic data reports due during the day:
    • FOMC Meeting Minutes at 2:00 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4119.48, 4109.89, and 4099.46
  • Critical resistance levels for S&P 500 are 4144.49, 4155.85, and 4174.24
  • The key levels for E-mini futures are 4157.75, the high at 5:00 AM, and 4137.25, the low at 9:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (June 2023) closed at 4158.00, and the index closed at 4145.58 – a spread of about +12.50 points; the futures closed at 4158.75; the fair value is -0.75
  • Pre-NYSE session open, futures were lower – at 9:00 AM, S&P 500 futures were down by -19.25, Dow by -116, and NASDAQ by -80.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • 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 3.698, up +17.7 basis points from two weeks ago;
    • The 30-year is at 3.951%, up +10.3 basis points;
    • The 2-year yield is at 4.280%, up +25.1 basis points;
    • The 10-Year-&-2-Year spread is at -0.582, down from -0.508
    • The 30-Year-&-10-Year spread is at 0.253, down from +0.327
  • VIX
    • At 19.69 @ 8:45 AM; up from the last close; above the 5-day SMA;
    • Recent high = 21.33 on May 4; low = 15.53 on May 1
    • Sentiment: Risk-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 red candle with small upper and lower shadows that gapped down
    • Stochastic (9, 1, 3): %K is below the %D;
    • RSI-9 declined to 50; below 8-DMA
  • Above 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • Fallen back into the middle of a Horizontal Channel between 4205.00 and 4060.00 that has been forming since March 30 and which was broken to the upside once
    • RSI-21 is below 20; potential Bullish Divergence
    • Below EMA20, which is below EMA10 of EMA50
  • Bias:  Side-Down
30-Minute (E-mini futures)
  • Trending down since 9:30 AM on May 22
    • RSI-21 has been moving just above 30 after dipping below 25; Bullish Divergence
    • Below EMA 20, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving down  since 1:30 AM
  • The Bollinger Band is relatively stable but expanded, with the price walking down the lower band
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Tuesday, May 23, in higher volume. The major indices gapped down at the open and then drifted sideways to up until Noon, when they gave up the ghost and traded down, closing near the lows for the day. Most did not close the down gap. All but one S&P sector – Energy – closed lower.

From Briefing.com:

…]

A broad retreat saw the S&P 500 and Nasdaq down more than 1.0% by the close. The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% while the Vanguard Mega Cap Growth ETF (MGK) closed down 1.6%. Declining issues led advancing issues by a 5-to-3 margin at the NYSE and a 4-to-3 margin at the Nasdaq.

Ten of the 11 S&P 500 sectors logged declines ranging from 0.3% (utilities) to 1.5% (materials). The S&P 500 energy sector (+1.0%) was alone in positive territory by the close.

[…]

The consumer discretionary sector (-0.9%) was a relative outperformer,

[…]

The SPDR S&P Regional Banking ETF (KRE) rose 1.0% after being up as much as 4.0% earlier in the session.

[…]

The 2-yr note yield was unchanged at 4.34%, garnering some added strength from a $42 billion 2-yr Treasury note auction that was met with excellent demand. The 10-yr note yield fell two basis points to 3.70%.

  • Nasdaq Composite: +20.0% YTD
  • S&P 500: +8.0% YTD
  • Russell 2000: +1.5% YTD
  • S&P Midcap 400: +0.6% YTD
  • Dow Jones Industrial Average: -0.3% YTD
[…]
  • The IHS Markit Manufacturing PMI fell to 48.5 in the preliminary May reading from 50.2. The IHS Markit Services PMI rose to 55.1 in the preliminary May reading from 53.6.
  • New home sales increased 4.1% month-over-month in April to a seasonally adjusted annual rate of 683,000 units (Briefing.com consensus 660,000) from a downwardly revised 656,000 (from 683,000) in March. On a year-over-year basis, new home sales were up 11.8%.
[…]
  • 7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior -5.7%)
  • 10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior +5.04 million)
  • 2:00 p.m. ET: Minutes from the May 2-3 FOMC meeting

Overseas:

  • Europe: DAX -0.4%, FTSE -0.1%, CAC -1.3%
  • Asia: Nikkei -0.4%, Hang Seng -1.3%, Shanghai -1.5%

Commodities: 

  • Crude Oil +0.84 @ 72.91
  • Nat Gas -0.06 @ 2.49
  • Gold -1.70 @ 1974.60
  • Silver -0.20 @ 23.62
  • Copper -0.03 @ 3.65
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