Morning Notes – Monday, May 9, 2022

Directional Bias For The Day:

• S&P Futures are lower at 9:15 AM; bounced up more than 20 points from 7:15 AM low of 4031.75;
• The odds are for a down day with elevated volatility – watch for a break above 4093.00 and a break below 4021.75 for clarity
• Key economic data report due during the day:
  • Final Wholesale Inventories ( 2.3% vs. 2.3% est.; prev. 2.3%) at 10:00 AM

Directional Bias Before Open:

Key Levels:

• Critical support levels for S&P 500 are 4056.88, 4034.44, and 4007.38
• Critical resistance levels for S&P 500 are 4062.51, 4084.55, and 4138.86
• Key levels for E-mini futures: break above 4093.00, the high at 3:00 AM and a break below 4031.75, the low at 7:15 AM

Pre-Open

• On Friday at 4:00 PM, S&P futures (June 2022) closed at 4119.00 and the index closed at 4123.34 – a spread of about -4.25 points; futures closed at 4119.50 for the day; the fair value is -0.50
• Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -59.75; Dow by -376; and NASDAQ by -241.75

Markets Around The World

• Markets in the East closed mostly lower – Shanghai closed higher; Hong Kong was closed for trading
• 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 3.147%, up +24.1 basis points from two weeks ago;
  • 30-years is at 3.271%, up +32.7 basis points;
  • 2-years yield is at 2.696%, up +6.6 basis points;
  • The 10-Year-&-2-Year spread is at 0.451, down from 0.276
  • The 30-Year-&-10-Year spread is at 0.124, up from 0.038
• VIX
  • At 33.60 @ 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:

Previous Session

Major U.S. indices closed lower on Friday, May 6, in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume. The day’s price action was highly volatile. Most indices closed near the open after moving up and down.

For the week, the major indices mostly closed lower in mostly mixed volume. Dow Jones Transportation Average closed higher. Dow Jones Industrial Average and Transports traded in higher volume. Most markets in Asia and Europe closed lower. The dollar index and the energy futures closed up and the precious metals and other commodities were mostly down for the week. The US Treasury yields were up.

From Briefing.com:

The stock market finished the first week of May on an underwhelming note with the Nasdaq (-1.4%) leading to the downside while the S&P 500 fell 0.6%. The two indices lost a respective 1.5% and 0.2% for the week. Small caps fared worse than the major averages, as the Russell fell 1.7%, giving up 1.3% for the week. […] The April jobs report was released ahead of the opening bell, showing stronger than expected headline payroll growth, which masked a decrease in the labor force participation rate. That rate dipped to 62.2% from 62.4% and is now more than a point below its pre-pandemic level. Nine sectors finished the day in negative territory with materials (-1.4%), consumer discretionary (-1.3%), communication services (-1.3%) finishing at the bottom of the leaderboard. The top-weighted technology sector (-0.8%) also ended among the laggards after a volatile session while energy (+2.9%) and utilities (+0.8%) outperformed throughout the day. […] The energy sector’s strength was underpinned by continued strength in crude oil, which climbed $1.80, or 1.7%, to $110.00/bbl, gaining $4.97, or 4.7%, for the week. The energy sector, meanwhile, jumped 10.2% this week, extending its year-to-date advance to 49.2%. […] The 10-yr yield rose six basis points to 3.12%, hitting a fresh high for the year while the 2-yr yield fell five basis points to 2.67%. […] April nonfarm payrolls increased by 428,000 (Briefing.com consensus 395,000). The 3-month average for total nonfarm payrolls decreased to 523,000 from 549,000. March nonfarm payrolls revised to 428,000 from 431,000. February nonfarm payrolls revised to 714,000 from 750,000. […] April unemployment rate was 3.6% (Briefing.com consensus 3.6%), versus 3.6% in March. Persons unemployed for 27 weeks or more accounted for 25.2% of the unemployed versus 23.9% in March. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.0%, versus 6.9% in March. April average hourly earnings were up 0.3% (Briefing.com consensus 0.4%) versus an upwardly revised 0.5% increase (from 0.4%) in March. Over the last 12 months, average hourly earnings have risen 5.5%, versus 5.6% for the 12 months ending in March. […] Consumer credit increased by $52.4 billion in March (Briefing.com consensus $25.0 billion) while the February increase was revised down to $37.7 bln from $41.8 bln. […] Nasdaq Composite -22.4% YTD Russell 2000 -18.1% YTD S&P 500 -13.5% YTD Dow Jones Industrial Average -9.5% YTD