Market Remarks

Morning Notes – Monday August 2, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day — watch for a break below 4402.00 for a change of sentiments
  • Key economic data report due during the day:
    • Final Manufacturing PMI  ( 63.1 est.; prev. 63.1) at 9:45 AM
    • ISM Manufacturing PMI (60.8 est.; prev. 60.6) at 10:00 AM
    • Construction Spending  ( 0.4% est.; prev. -0.3%) at 10:00 AM
    • ISM Manufacturing Prices ( 87.9 est.; prev. 92.1) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4389.65, 4372.51, and 4350.06
  • Critical resistance levels for S&P 500 are 4412.25, 4418.57, and 4429.97
  • Key levels for E-mini futures: break above 4419.75, the high of 3:30 AM and break below 4402.00, the low of 7:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (September 2021) closed at 4390.00 and the index closed at 4395.26 – a spread of about -7.50 points; futures closed at 4389.50 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +17.25; Dow by +111, and NASDAQ by +69.00

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are higher
    • Precious metals are mixed
    • Industrial metals are mostly higher
    • Most soft commodities are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.219%, down -8.1 basis points from two weeks ago;
    • 30-years is at 1.895%, down -3.6 basis points;
    • 2-years yield is at 0.188%, down -5.0 basis points;
    • The 10-Year-&-2-Year spread is at 1.031, down from 1.062
  • VIX
    • At 18.40 @ 8:00 AM; up from the last close; at/below 5-day SMA;
    • Recent high =  25.09 on July 19; low =  16.33 on July 23
    • Sentiment: Risk-On-Neutral

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

Monthly
  • Confirmed Uptrend
  • May 2021 was a Doji with a small upper shadow and a long lower shadow; at all-time closing and intra-month highs;
    • Stochastic %K above %D near 100;
    • RSI-9 near 80; broke above a downtrend line from January 2018
    • Above the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows
Weekly:
  • The week ending on July 30 was a Doji candle with almost equal-sized upper and lower shadows;
    • Stochastic (9,1, 3): %K crossed below %D; just below 80
    • RSI (9) is just around 70
  • The week was down -16.53 or -0.4%; the 5-week ATR is 94.73
  • A down week; second in the last five weeks, and third in the last ten weeks
  • The weekly pivot point=4399.25, R1=4425.98, R2=4456.71; S1=4368.52, S2=4341.79; No pivot levels were breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23, 2020
Daily
  • A small Doji candle with almost no lower shadow and a small upper shadow;
    • %K crossed below %D; below 90
    • RSI-9 is just below 60; below 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Uptrend
2-Hour (E-mini futures)
  • Moving within a Horizontal Channel between 4420.00 and 4380.00; near the upper bound of the pattern
    • RSI-21 down to near 50 from near 70
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving sideways since 10:30 AM on July 23
    • RSI-21 is around 50
    • Below EMA20 but above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up 4:15 AM
  • The Bollinger Band is expanding a bit since 6:15 AM with price walking down the lower band;
    • Stochastic (9, 1, 3): %K crisscrossing %D since 3:30 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Friday, July 30 in higher volume. The indices opened lower and then mostly traded sideways within a narrow range.

For the week, the major US indices closed mostly lower in lower volume.  Russell 2000 and NYSE Composite closed higher. The markets in Asia closed lower but the European markets were mixed. The dollar index was down, energy futures were mixed, the precious metals were up and the industrial metals and soft commodities were mostly down for the week. The US Treasury yield ticked down for the week. All but three S&P sectors – Consumer Discretionary, Industrials, and Technology – closed up for the week.

From Briefing.com:

The S&P 500 declined 0.5% on Friday, as disappointing earnings news out of Amazon.com (AMZN 3327.59, -272.33, -7.6%) and negative-sounding headlines surrounding the Delta variant fed into pestering growth concerns. The Nasdaq Composite lost 0.7%, the Dow Jones Industrial Average lost 0.4%, and the Russell 2000 lost 0.6%. […]

The S&P 500 consumer discretionary sector (-2.8%) really felt the weight of AMZN, losing 3% on Friday. The energy (-1.8%), utilities (-0.9%), and financials (-0.7%) sectors also underperformed, while the materials (+0.4%), real estate (+0.3%), health care (+0.1%), and consumer staples (+0.1%) sectors closed higher.

[…]

The Treasury market appeared to reflect ongoing expectations for peak growth and inflation rates, as the 10-yr yield decreased three basis points to 1.24%. The 2-yr yield decreased two basis points to 0.18%. The U.S. Dollar Index increased 0.3% to 92.14. WTI crude futures increased 0.3%, or $0.25, to $73.87/bbl.

[…]
  • Personal spending increased 1.0% month-over-month in June (Briefing.com consensus 0.7%). Personal income was up 0.1% month-over-month (Briefing.com consensus -0.6%), with a 0.7% increase in compensation helping to offset a 2.0% decline in personal current transfer receipts. The PCE Price Index was up 0.5% (Briefing.com consensus 0.7%) and the core-PCE Price Index, which excludes food and energy, increased 0.4% (Briefing.com consensus 0.6%). On a year-over-year basis, the PCE Price Index held steady at 4.0% while the core-PCE Price Index ticked up slightly to 3.5% from 3.4% in May.
  • […]
  • The final July reading for the University of Michigan Index of Consumer Sentiment edged up to 81.2 (Briefing.com consensus 81.0) from the preliminary reading of 80.8. The final reading for June was 85.5.
  • […]
  • The Q2 Employment Cost Index increased 0.7% (Briefing.com consensus 0.9%), seasonally adjusted, for the three-month period ending June 2021 after increasing 0.9% for the three-month period ending March 2021. Wages and salaries, which account for about 70% of compensation costs, rose 0.9%, while benefit costs, which make up the remainder of compensation costs, increased 0.4%.
  • […]
  • The Chicago PMI for July increased to 73.4 (Briefing.com consensus 63.8) from 66.1 in June.
[…]
  • S&P 500 +17.0% YTD
  • Dow Jones Industrial Average +14.1% YTD
  • Nasdaq Composite +13.9% YTD
  • Russell 2000 +12.7% YTD
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