Market Remarks

Morning Notes – Wednesday October 6, 2021

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 7:45 AM;
  • Futures are  sharply down from  the previous close but are rising since 5:30 AM from 4273.00 to around 4290
  • The odds are for a down day with elevated volatility – watch for a break above 4309.00 and a break below 4281.25 for more insights
  • Key economic data report due during the day:
    • ADP Non-Farm Employment Change ( 425K vs. 374K) at 8:15 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4288.86, 4278.94, and 4262.05
  • Critical resistance levels for S&P 500 are 4309.87, 4323.39, and 4344.07
  • Key levels for E-mini futures: break above 4303.00, the low of 9:30 AM on Tuesday and break below 4281.25, the low of 7:45 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2021) closed at 4335.00 and the index closed at 4345.72 – a spread of about -10.75 points; futures closed at 4334.00 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 7:45 AM, S&P 500 futures were down -50.75; Dow by -348; and NASDAQ by -190.25

Markets Around The World

  • Markets in the East closed mostly lower Singapore closed up; Shanghai was closed for trading;
  • European markets are lower;
  • Currencies (from two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • NZD/USD
  • Commodities (from two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are higher
    • Soft commodities are mostly higher
  • Treasuries (from two weeks ago)
    • 10-years yield closed at 1.529%, up +20.5 basis points from two weeks ago;
    • 30-years is at 2.098%, up +24.1 basis points;
    • 2-years yield is at 0.286%, up +7.4 basis points;
    • The 10-Year-&-2-Year spread is at 1.243, up from 1.110
  • VIX
    • At 23.64 @ 6:45 AM; up from the last close; above 5-day SMA;
    • Recent high =  28.79 on September 20; low =  17.65 on September 16
    • Sentiment: Risk-Off

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

Monthly
  • September 2021 was a relatively large Bearish Engulfing with almost no upper and lower shadows; made all-time intra-month high;
    • Stochastic (9, 1, 3): %K turned below %D from near 100;
    • RSI-9 just below 70 from above 80; Bearish Divergence
    • Above the upper band of a 120-month regression channel;
  • Confirmed Uptrend: sequence of higher highs and higher lows
Weekly:
  • The week ending on October 1 was a Bearish Engulfing candle with a small upper shadow and a lower shadow that is half the size of the real body
    • Stochastic (9,1, 3): %K is below %D below 30;
    • RSI-9 is below 50
  • The week was down -98.44 or -2.2%; the 5-week ATR is 101.55
  • A down week; third in the last five weeks, and fifth in the last ten weeks
  • The weekly pivot point=4367.62, R1=4446.72, R2=4536.40; S1=4277.94, S2=4198.84; S1 pivot level was breached
  • Below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A green Harami candle with almost no lower shadow and small upper shadow;
    • Stochastic (9, 1, 3): %K again crossed above %D;
    • RSI-9 again turned up; just above 40; above 8-day EMA; Potential Bullish Divergence
  • Below 20-day EMA and 50-day EMA; at/below 100-day SMA; above 200-day SMA
  • Correction
2-Hour (E-mini futures)
  • Moving down since 2:00 PM on Tuesday from a resistance level; moving sideways since 10:00 AM on September 30 with a down bias within a large range between 4365.00 and 4260.00 – near the low of the range;
    • RSI-21 moved down from above 70 just above 30
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving down since 2:30 PM on Tuesday from a high of 4359.75 to below 4280.00; just above a resistance level;
    • RSI-21 is moving down from above 70 to  just above 30
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 4:00 PM on Tuesday
  • The Bollinger Band is expanding since 3:00 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is above %D since 6:30 AM
  • Bias:  Side-Down

Previous Session

Major U.S. indices closed higher on Tuesday, October 5 in lower volume. Major indices opened higher and then traded higher. In the early afternoon, the indices moved sideways near the day’s highs. In the last hour of trading, indices turned down and gave up a significant portion of their day’s gains. The sentiments turned negative by the close.

From Briefing.com:

The S&P 500 rose 1.1% on this Turnaround Tuesday session, as the mega-cap stocks mechanically bounced back from recent losses. The benchmark index finished right in between the Dow Jones Industrial Average (+0.9%) and Nasdaq Composite (+1.3%) in percentage terms, while the Russell 2000 increased just 0.5%. […]

Nine of the 11 S&P 500 sectors closed higher, led by financials (+1.8%) with nearly a 2.0% gain, and the Invesco S&P 500 Equal Weight ETF (RSP 151.96, +1.08) rose 0.7%.

The real estate (-0.9%) and utilities (-0.2%) sectors were the only sectors that closed lower,

[…]

The 10-yr yield rose five basis points to 1.53% while the 2-yr yield increased one basis point to 0.29%. WTI crude futures settled close to $79 per barrel ($78.97, +1.28, +1.7%). Natural gas futures rose 8.6% to $6.26/MMBtu. The U.S. Dollar Index increased 0.2% to 93.98.

[…]
  • The ISM Non-Manufacturing Index for September increased to 61.9% (Briefing.com consensus 60.0%) from 61.7% in August. The dividing line between expansion and contraction is 50.0%. The September reading marks the sixteenth straight month of growth for the services sector.
  • […]
  • The August Trade Balance report was worse than expected. It showed a widening in the trade deficit to $73.3 billion (Briefing.com consensus $71.0 billion) from a downwardly revised $70.3 billion (from $70.1 billion) in July. The widening in the deficit was the result of imports being $3.0 billion more than exports in August.
  • […]
  • The final IHS Markit Services PMI increased to 54.9 in September from 54.4 in the final reading for August.
[…]
  • S&P 500 +15.7% YTD
  • Russell 2000 +12.9% YTD
  • Dow Jones Industrial Average +12.1% YTD
  • Nasdaq Composite +12.0% YTD

Overseas: 

  • Europe: DAX +1.1%, FTSE +0.9%, CAC +1.5%
  • Asia: Nikkei -2.2%, Hang Seng +0.3%, Shanghai closed for holiday

Commodities: 

  • Crude Oil +1.12 @ 79.10
  • Nat Gas +0.50 @ 6.26
  • Gold -4.30 @ 1762.10
  • Silver +0.03 @ 22.64
  • Copper -0.05 @ 4.19
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