Morning Notes – Friday, October 6, 2023

/ October 6, 2023

Directional Bias For The Day:

  • S&P Futures are a little higher at 8:00 AM – moving sideways  around the 4295.00 level ahead of the 8:30  AM Non-Farm Employment report
  • The daily bias is down, the futures are within a support zone, and there is a good chance of a bounce; odds are for elevated volatility following the economic news at 8:30 AM – watch for a break above 4305.25 or a break below 4281.75 for clarity
  • The major economic data reports due during the day:
    • Non-Farm Employment Change ( 171K est.; prev. 187K) at 8:30 AM
    • Unemployment Rate ( 3.7% est.; prev. 3.8% ) at 8:30 AM
    • Average Hourly Earnings ( 0.3% est.; prev. 0.2%) at 8:30 AM
  • Weekly: Uptrend Under Pressure
  • Daily: Correction
  • 120-Min: Down-Side
  • 30-Min: Side
  • 15-Min: Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for the S&P 500 are 4225.91, 4216.45, and 4194.92
  • Critical resistance levels for the S&P 500 are 44268.50, 4288.26, and 4303.12
  • The key levels for E-mini futures are 4305.25, the high at 6:30 AM, and 4281.75, the low at 2:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (December 2023) closed at 4291.50, and the index closed at 4258.19 – a spread of about +33.25 points; the futures closed at 4290.75; the fair value is +0.75
  • Pre-NYSE session open, futures were higher – at 7:45 AM, S&P 500 futures were up by +6.75, Dow by +59, and NASDAQ by +27.50

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo was down; Shanghai was closed
  • European markets are higher
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • NZD/USD
  • USD/CAD
  • INR/USD
  • EUR/USD
  • GBP/USD
  • AUD/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 4.717, up +23.7 basis points from two weeks ago;
    • The 30-year is at 4.886%, up +33.4 basis points
    • The 2-year yield is at 5.013%, down -13.5 basis points;
    • The 10-Year-&-2-Year spread is at -0.296, up from -0.668
    • The 30-Year-&-10-Year spread is at 0.169, up from +0.072
  • VIX
    • At 18.57 @ 7:30 AM; up from the last close; above the 5-day SMA;
    • Recent high = 20.88 on October 4; low = 15.83 on September 129
    • Sentiment: Risk-Off-Neutral

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

Weekly:
  • The week ending on September 29 was a relatively small candle that looked like Dragonfly Doji just below resistance, which was acting as a support until the last week.
    • Stochastic (9,1, 3): %K is below the %D;
    • RSI-9 has declined to near 40
  • The week was down -33.01 or -0.7%; the 5-week ATR  is 107.08
  • Fourth down week in the last five weeks and seventh in the previous ten weeks;
  • The weekly pivot point=4288.40, R1=4338.16, R2=4388.28; S1=4238.28, S2=4188.52; S1 pivot level was breached
  • Below 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A long-legged Harami Doji off an uptrend line since October 13, 2022, and just above the lows of June 1, 2023.
  • Gapped down on September 21 and broke below a symmetrical triangle – the 61.8% extension target near 4250.00 is achieved; the 100% extension target is around 4150.00.

    • Stochastic (9, 1, 3): %K crossed above the %D; Bullish Divergence
    • RSI-9 bounced up to above 30 from around 20, below 8-DMA;
  • Below 20-day EMA, 50-day EMA, and 100-day SMA; above 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • The downtrend since 2:00 AM on September 15. Broke below a horizontal channel on September 21 – the 100% extension target near 4305.00 is achieved, and the 161.8% extension target is around 4224.66;
  • Turned down at 8:00 AM on September 29 from a resistance level after bouncing from 4277.00, the low reached at 6:00 AM on September 27
  • The chart action since early June shows an uneven Head-and-Shoulder pattern. The neckline was broken on September 25. The 61.8% extension target is around 4210.00, the 100% extension target is near 4110.00, and the 161.8% extension target is around 3950.00. A convincing move above 4400.00 will nullify the pattern
    • RSI-21 has been moving around 55 for over two day
    • At/above EMA20, which is at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sidewyas since 11:30 AM on October 4 between 4304.00 and 4277.25
    • RSI-21 has been moving around 55 for over two days
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving up since 3:15 AM.
  • The Bollinger Band has been expanding a little – the price has declined to the middle band from the upper band.
  • Bias: Side

Previous Session

Major U.S. indices closed mostly lower on Thursday, October 5, in lower volume. Russell 2000 and NYSE Composite closed higher.

The indices opened flat, then until 11:00 Am, and then drifted higher until the close. The day’s price action was indecisive a day before the Non-Farm Payroll report. All but four S&P sectors – Financials, Technology, Healthcare, and Real Estate – closed down.

The dollar index declined. The US Treasury Yields, the energy futures, and the soft commodities closed mixed. The hard commodities closed down.

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