Market Remarks

Morning Notes – Friday, May 6, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:15 AM; moving sideways with a down bias since 12:00 PM on Thursday between 4169.00 and 4099.00
  • The odds are for a down day with a good chance of a sideways move from the pre-open levels around 4111.00 – watch for a break above 4152.00 for a change of sentiments
  • Key economic data report due during the day:
    • Non-Farm Employment Change ( 428K vs. 390K est.; prev. 428K ) at 8:30 AM
    • Average Hourly Earnings ( 0.3% vs. 0.4% est.; prev. 0.5%) at 8:30 AM
    • Unemployment Rate ( 3.6% vs. 3.5% est.; prev. 3.6%) at 8:30 AM

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min:  Down
  • 30-Min: Down-Side
  • 15-Min: Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for S&P 500 are 4106.01, 4062.51, and 4034.44
  • Critical resistance levels for S&P 500 are 4152.72, 4174.06, and 44209.86
  • Key levels for E-mini futures: break above 4152.00, the high at 8:30 AM and a break below 4112.75, the low at 3:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (June 2022) closed at 4144.50 and the index closed at 4146.87 – a spread of about -2.25 points; futures closed at 4143.25 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -19.75; Dow by -120; and NASDAQ by -88.00

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo closed higher
  • European markets are lower
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 3.057%, up +14.0 basis points from two weeks ago;
    • 30-years is at 3.149%, up +21.6 basis points;
    • 2-years yield is at 2.724%, up +2.1 basis points;
    • The 10-Year-&-2-Year spread is at 0.333, down from 0.214
    • The 30-Year-&-10-Year spread is at 0.092, up from 0.016
  • VIX
    • At 32.98 @ 8:00 AM; up from the last close; above the 5-day SMA;
    • Recent high = 36.64 on May 2; low = 24.94 on May 4
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on April 29 was a red candle with a small upper shadow and almost no lower shadow;
    • Stochastic (9,1, 3): %K is below %D; near zero
    • RSI-9 is near 30
  • The week was down -139.85 or -3.3%; the 5-week ATR  is 161.91
  • A down week; fourth in the last five weeks, and sixth in the previous ten weeks
  • The weekly pivot point=4188.22, R1=4252.16, R2=4372.39; S1=4067.99, S2=4004.05; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A large red candle with almost no upper shadow and a lower shadow that is one-third the size of the real body
    • Stochastic (9, 1, 3): %K crossed below %D;
    • RSI-9 declined to below 40 from above 50; above 8-day EMA
  • Below 50-day EMA, 20-day EMA, 200-day SMA, and 100-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • The downtrend since 12:00 AM on March 30; lower highs and lower lows since April 21; turned down from a resistance level around 4303.50
    • RSI-21 drifted  up from near 25 at 10:00 AM on Thursday to 40
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Forming a symmetrical triangle following a sharp decline on Thursday – near the upper bound of the triangle;
    • RSI-21 has been moving sideways to up since 3:30 PM and after making a Bullish Divergence
    • At/aboveEMA20 but below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting sideways since 10:30 PM
  • The Bollinger Band narrowing
  • Bias: Side

Previous Session

Major U.S. indices closed lower on Thursday, May 5, in higher volume.

Major indices opened lower and then decline sharply, erasing Wednesday’s gains and then some. The first half-hour of trading gave the feeling of liquidation. Markets continued to decline for the rest of the day but the intensity slowed down a bit.

From Briefing.com:

The S&P 500 dropped 3.6% on Thursday in a terribly disappointing session. The Nasdaq Composite (-5.0%) and Russell 2000 (-4.0%) sold off even more than the benchmark index while the Dow Jones Industrial Average fell 3.1%. […]

Selling was broad-based: all 11 S&P 500 sectors closed lower with losses ranging between 1.1% (utilities) and 5.8% (consumer discretionary), all 30 Dow components closed lower, and declining issues outpaced advancing issues by an 8:1 margin at the NYSE.

[…]

The 2-yr yield, which is most sensitive to changes in the fed funds rate, jumped 11 basis points to 2.72% after dropping 15 basis points yesterday. The U.S. Dollar Index rose 0.9% to 103.50. WTI crude futures increased 0.2%, or $0.23, to $108.20/bbl.

[…]
  • The weekly initial claims report showed jobless claims for the week ending April 30 rising by 19,000 to 200,000 (Briefing.com consensus 184,000). Continuing claims for the week ending April 23 decreasing by 19,000 to 1.384 million, which is the lowest since January 17, 1970.
  • […]
  • Nonfarm business sector labor productivity decreased 7.5% in the first quarter (Briefing.com consensus -2.8%) following a downwardly revised 6.3% increase (from 6.6%) in the fourth quarter. Unit labor costs soared 11.6% (Briefing.com consensus 7.3%) following an upwardly revised 1.0% increase (from 0.9%) in the fourth quarter. The first quarter decline in productivity is the largest since the third quarter of 1947.
[…]
  • Dow Jones Industrial Average -9.2% YTD
  • S&P 500 -13.0% YTD
  • Russell 2000 -16.7% YTD
  • Nasdaq Composite -21.3% YTD

Overseas: 

  • Europe: DAX -0.5%, FTSE +0.1%, CAC -0.4%
  • Asia: Nikkei market closed, Hang Seng -0.4%, Shanghai +0.7%

Commodities: 

  • Crude Oil +0.23 @ 108.20
  • Nat Gas +0.37 @ 8.81
  • Gold +2.30 @ 1876.10
  • Silver -0.05 @ 22.41
  • Copper -0.04 @ 4.28
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