Market Remarks

Morning Notes – Thursday August 5, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up to a sideways day from the pre-open levels around 4400.00  — watch for a break above 4408.25 and a break below 4391.25 for clarity
  • Key economic data report due during the day:
    • Unemployment Claims ( 385K vs. 382K est.; prev. 400K) at 8:30 AM
    • Trade Balance ( -75.7B vs. -74.2B est.; prev. -71.2B) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4400.23, 4389.09, and 4372.51
  • Critical resistance levels for S&P 500 are 4415.95, 4423.79, and 4428.42
  • Key levels for E-mini futures: break above 4408.25, the high of 10:00 AM and break below 4391.25, the low of 11:30 PM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2021) closed at 4394.00 and the index closed at 4402.66 – a spread of about -8.50 points; futures closed at 4394.75 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +9.50; Dow by +53, and NASDAQ by +25.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Seoul, and Singapore closed lower; Tokyo, Sydney, and Mumbai closed up
  • European markets are mostly higher – the UK and Spain are lower
  • Currencies (from two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities (from two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly lower
    • Most soft commodities are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.184%, down -9.6 basis points from two weeks ago;
    • 30-years is at 1.832%, down -9.8 basis points;
    • 2-years yield is at 0.180%, down -3.0 basis points;
    • The 10-Year-&-2-Year spread is at 1.004, down from 1.070
  • VIX
    • At 17.60 @ 8:15 AM; down from the last close; 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 red Harami candle with almost no lower and upper shadows at all-time highs;
    • %K crossed below %D; near 50
    • RSI-9 is near 55; 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 since Ju;y 23 between 4420.00 and 4380.00; near the middle of the pattern
    • RSI-21 near 50;
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Moving sideways since 10:30 AM on July 23; moving within a smaller range – between 4410.00 and 4398.00 –  since 8:00 AM on August 4
    • RSI-21 is moving around 50
    • At/above EMA20 but at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting sideways since 1:00 PM
  • The Bollinger Band is narrow and stable;
    • Stochastic (9, 1, 3): %K crossed below %D at 8:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed mostly lower on Wednesday, August 4 in mostly lower volume. NASDAQ Composite closed higher and Dow Jones Transportation Average traded in higher volume. Day’s price action was small though the bias was down.

From Briefing.com:

The S&P 500 decreased 0.5% on Wednesday in a tired session. […]

The Nasdaq ended the session in positive territory, while the Dow Jones Industrial Average (-0.9%) and Russell 2000 (-1.2%) underperformed the S&P 500.

[…]

The 10-yr yield then jumped to 1.21% after the release of the July ISM Non-Manufacturing Index at 10:00 a.m. ET, which increased to a record high of 64.1% (Briefing.com consensus 60.5%). The 10-yr yield settled the session at 1.18%, or one basis point above yesterday’s settlement.

[…]

Nine of the 11 S&P 500 sectors closed lower, including energy (-2.9%), industrials (-1.4%), and consumer staples (-1.3%) with losses over 1.0%.

[…]

The Fed-funds-sensitive 2-yr yield was unchanged at 0.17%. The U.S. Dollar Index increased 0.2% to 92.27.

[…]
  • The ISM Non-Manufacturing Index for July increased to 64.1% (Briefing.com consensus 60.5%) from 60.1% in June. The dividing line between expansion and contraction is 50.0%. The July reading is a record high, eclipsing the former high of 64.0% seen in May, and marks the fourteenth straight month of growth for the services sector.
  • […]
  • The ADP Employment Change report estimated 330,000 jobs were added to private-sector payrolls in July, which was well below the Briefing.com consensus of 650,000. The June increase was downwardly revised to 680,000 from 692,000.
  • The final reading for the July IHS Markit Services PMI checked in at 59.9, which was slightly higher from the preliminary reading of 59.8.
  • The weekly MBA Mortgage Applications Index decreased 1.7% following a 5.7% gain in the prior week.
[…]
  • S&P 500 +17.2% YTD
  • Nasdaq Composite +14.7% YTD
  • Dow Jones Industrial Average +13.7% YTD
  • Russell 2000 +11.2% YTD

Overseas: 

  • Europe: DAX +0.9%, FTSE +0.3%, CAC +0.3%
  • Asia: Nikkei -0.2%, Hang Seng +0.9%, Shanghai +0.9%

Commodities: 

  • Crude Oil -2.62 @ 67.99
  • Nat Gas +0.10 @ 4.17
  • Gold +1.10 @ 1813.40
  • Silver -0.11 @ 25.50
  • Copper -0.04 @ 4.34
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