Market Remarks

Morning Notes – Thursday, May 25, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM. Futures have been moving up since 3:45 AM – up more than 25 points.
  • The odds are for an up day with elevated volatility – watch for a break below 4145.50 for a change of sentiments.
  • The major economic data reports due during the day:
    • Prelim GDP ( 1.3% vs. 1.1% est.; prev. 1.1%) at 8:30 AM
    • Unemployment Claims ( 229K vs. 249K est.; prev. 225K) at 8:30 AM
    • Prelim GDP Price Index ( 4.2% vs. 4.0% est.; prev. 4.0%) at 8:30 AM
    • Pending Home Sales ( 1.0% est.; prev. -5.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4142.54, 4132.38, and 4112.60
  • Critical resistance levels for S&P 500 are 4155.85, 4174.24, and 4185.68
  • The key levels for E-mini futures are 4166.00, the high at 1:00 AM on Wednesday, and 4145.50, the low at 7:30 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2023) closed at 4126.75, and the index closed at 4115.24 – a spread of about +11.50 points; the futures closed at 4126.00; the fair value is +0.75
  • Pre-NYSE session open, futures were mixed – at 9:00 AM, S&P 500 futures were up by +38.25, Dow down by -4, and NASDAQ up by +318.25

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo and Mumbai closed higher
  • European markets are mostly lower – Switzerland and STOXX 600 are higher
  • 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 mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.719, up +28.0 basis points from two weeks ago;
    • The 30-year is at 3.965%, up +16.6 basis points;
    • The 2-year yield is at 4.381%, up +46.5 basis points;
    • The 10-Year-&-2-Year spread is at -0.662, down from -0.477
    • The 30-Year-&-10-Year spread is at 0.246, down from +0.360
  • VIX
    • At 19.21 @ 8:45 AM; down from the last close; above the 5-day SMA;
    • Recent high = 21.33 on May 4; low = 15.53 on May 1
    • Sentiment: Risk-On

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
  • Another red candle that gapped down – almost no upper shadow and a lower shadow almost equal o the real body
    • Stochastic (9, 1, 3): %K is below the %D;
    • RSI-9 declined to 50; below 8-DMA
  • Below 20-day EMA; above 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Near 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 has risen above 60 from below 20 and after making a Bullish Divergence
    • Above EMA20, but below EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Moving up since 12:30 PM on Wednesday from a support level around 4115.00
    • RSI-21 has moved above 60 after moving around 50 overnight
    • Above EMA 20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving up since 2:00 AM
  • The Bollinger Band has been expanding since 2:15 AM, with the price walking up the upper band
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Wednesday, May 24, in mixed volume. Dow Jones Industrial Average and Russell 2000 traded in lower volume.

The major indices gapped down at the open and moved downward until early afternoon. The indices then turned up and recovered some of the losses.

All but one S&P sector – Energy – closed lower.

From Briefing.com:

[…]

Market breadth skewed negative with decliners leading advancers by a greater than 3-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq.

Ten of the 11 S&P 500 sectors declined with real estate (-2.2%) suffering the biggest loss by a decent margin. The financials (-1.3%) and industrials (-1.3%) sectors were also among the top laggards today.

The energy sector (+0.5%) was alone in positive territory by the close, climbing alongside oil prices ($74.26/bbl, +1.35, +1.9%)

[…]

The 2-yr note yield was unchanged at 4.34% and the 10-yr note yield rose two basis points to 3.72%.

  • Nasdaq Composite: +19.3% YTD
  • S&P 500: +7.2% YTD
  • Russell 2000: +0.3% YTD
  • S&P Midcap 400: -0.4% YTD
  • Dow Jones Industrial Average: -1.1% YTD
[…]
  • The weekly MBA Mortgage Application Index dropped 4.6% with purchase applications falling 4.0% and refinance applications dropping 5.0%.
  • The weekly EIA Crude Oil Inventories showed a draw of 12.46 million barrels versus a build of 5.04 million barrels last week.
[…]

Overseas:

  • Europe: DAX -1.9%, FTSE -1.8%, CAC -1.7%
  • Asia: Nikkei -0.9%, Hang Seng -1.8%, Shanghai -1.3%

Commodities: 

  • Crude Oil +1.35 @ 74.26
  • Nat Gas +0.07 @ 2.56
  • Gold -9.20 @ 1964.80
  • Silver -0.38 @ 23.25
  • Copper -0.09 @ 3.56
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