Morning Notes – Thursday, October 26, 2023

/ October 26, 2023

Directional Bias For The Day:

  • S&P Futures are lower at 8:15 AM – moving sidewyas tod own since 9:30 PM between 4189.25 and 4171.00
  • The odds are for a down day with elevated volatility – watch for breaks above 4189.25 for a change of sentiments
  • The major economic data reports due during the day:
    • Advance GDP ( 4.9% vs. 4.5% est.; prev. 2.1%) at 8:30 AM
    • Unemployment Claims ( 210K vs. 208K est.; prev. 200K) at 8:30 AM
    • Advance GDP Price Index (3.5% vs. 2.7% est.; prev. 1.7%) at 8:30 AM
    • Core Durable Goods Orders ( 0.5% vs. 0.2% est.; prev. 0.4%) at 8:30 AM
    • Durable Goods orders ( 4.7% vs. 1.9% est.; prev. 0.1%) at 8:30 AM
    • Goods Trade Balance ( -85.8B vs. -86.2B est.; prev. -84.6B) at 8:30 AM
    • Prelim Wholesale Inventories ( 0.0% vs 0.1% est.; prev. -0.1%) at 8:30 AM
    • ECB Press Conference at 8:45 AM
  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: Side-Down

Key Levels:

  • Critical support levels for the S&P 500 are 4166.15, 4129.73, and 4103.98
  • Critical resistance levels for the S&P 500 are 4181.42, 4195.60, and 4201.24
  • The key levels for E-mini futures are 4189.25, the high at 5:30 AM and 4171.00, the low at 3:30 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2023) closed at 4210.25, and the index closed at 4186.77 – a spread of about +23.50 points; the futures closed at 4209.75; the fair value is +0.50
  • Pre-NYSE session open, futures were lower – at 8:00 AM, S&P 500 futures were down by -30.50, Dow by -132, and NASDAQ by -146.25

Markets Around The World

  • Markets in the East closed mostly lower – Shanghai closed higher
  • European markets are mostly lower – France and Italy are up
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CAD
  • EUR/USD
  • GBP/USD
  • USD/CHF
  • AUD/USD
  • NZD/USD
  • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.953, up +35.8 basis points from two weeks ago;
    • The 30-year is at 5.092%, up +35.4 basis points
    • The 2-year yield is at 5.145%, up +14.2 basis points;
    • The 10-Year-&-2-Year spread is at -0.192, up from -0.408
    • The 30-Year-&-10-Year spread is at 0.139, down from +0.143
  • VIX
    • At 21.70 @ 7:30 AM; up from the last close; above the 5-day SMA;
    • Recent high = 23.08 on October 23; low = 15.44 on October 12; Sentiment: Risk-Off

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

Weekly:
  • The week ending on October 20 was a relatively large Bearish Engulfing candle with almost no lower shadow and an upper shadow one-third the size of the real body. The index is breaking below an uptrend line from the October 2022 low.
    • Stochastic (9,1, 3): %K crossed below the %D;
    • RSI-9 has declined below 40
  • The week was down -103.62 or 2.4%; the 5-week ATR  is 126.00
  • Third down week in the last five weeks and sixth in the previous ten weeks;
  • The weekly pivot point=4280.25, R1=4337.48, R2=4450.79; S1=4166.94, S2=4109.71; R1/S1/S2 pivot levels were breached
  • Below 10-week EMA and 39-week SMA; above 89-week SMA
  • In Correction
Daily
  • Another relatively large red candle, which closed below a bearish pattern separating from the previous red candle, at a support level – the low October 3; broke below a horizontal trading range since October 9 between 4385.00 and 4311.00 – the 161.8% extension target near 4192.43 is achieved; the next support is at 4103.98
  • Broke below an uneven Head-&-Should pattern on September 22, and a bounce in October did not last – the 61.8% extension target is near 4135.66, the 100% extension target is near 4029.09, and the 161.8% extension target is near 3856.67
    • Stochastic (9, 1, 3): %K again crossed below the %D, near zero
    • RSI-9 is near 30 and below 8-DMA – potential Bullish Divergence if the index bounces up;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Broke below a horizontal trading channel on October 4 – the 61.8% extension target is near 4122.100, the 100% extension target is near 4052.00, and the 161.8% extension target is near 3938.50
    • RSI-21 has fallen below 20
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down since 12:00 PM on October 17; moving sideways to down since 9:30 PM on Wednesday
    • RSI-21 has bounced above 35 from near 25
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving sideways to down since 1:15 AM.
  • The Bollinger Band is expanding a little – the price rebounding from the lower band to the middle band.
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, October 25, in mostly higher volume. The Dow Jones Industrial Average traded in lower volume.

The major indices opened lower and traded down for the day with a brief bounce in late morning, which did not last, and the indices closed near the lows for the day. Most indices are breaking below the recent bearish patterns.

All but two S&P sectors – Consumer Staples and Utilities – closed down.

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