Morning Notes – Friday, May 27, 2022

/ May 27, 2022

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; breaking above a Cup-With-Handle pattern;
  • The odds are for an up day with elevated volatility – watch for a break below 4058.75 for a change of sentiments
  • The key economic data report due during the day:
    • PCE Price Index ( 0.2% vs. 0.3% est.; prev. 0.9%) at 8:30 AM
    • Core PCE Price Index ( 0.3% vs. vs. 0.3% est.; prev. 0.3%) at 8:30 AM
    • Personal Income (0.4% vs. 0.5% est.; prev. 0.5%) at 8:30 AM
    • Personal Spending ( 0.9% vs. 0.7% est.; prev. 1.4%) at 8:30 AM
    • Good Trade Balance ( -105.9B vs. -114.8B; prev. -127.1B0 at 8:30 AM
    • Prelim Wholesale Iventories ( 2.1% vs. 2.0% est.; prev. 2.3% ) at 8:30 AM
    • Revised UoM Consumer Sentiment ( 59.1 est.; prev. 59.1) at 10:00 AM
    • Revised UoM Inflation Expectations ( prev. 5.4%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4075.00, 4050.00, and 4029.00
  • Critical resistance levels for S&P 500 are 4090.70, 4138.86, and 4152.31
  • Key levels for E-mini futures: break above 4086.75, the high at 8:45 AM and a break below 4058.75, the low at 8:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (June 2022) closed at 4055.50 and the index closed at 4057.84 – a spread of about +2.25 points; futures closed at 4055.75 for the day; the fair value is -0.25
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by 25.75; Dow by +66; and NASDAQ by +119.50

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies (Compared to two weeks ago):
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 2.724%, down -9.3 basis points from two weeks ago;
    • 30-years is at 2.950%, down -3.5 basis points;
    • 2-years yield is at 2.480%, down -14.3 basis points;
    • The 10-Year-&-2-Year spread is at 0.244, down from 0.194
    • The 30-Year-&-10-Year spread is at 0.226, up from 0.168
  • VIX
    • At 26.86 @ 9:00 AM; down from the last close; below the 5-day SMA;
    • Recent high = 35.48 on May 9; low = 25.51 on May 17
    • Sentiment: Risk-On
    • Forming a symmetrical triangle since April 25

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

Weekly:
  • The week ending on May 20 was a large red candle; the real body was complete within the lower shadow of the previous week’s candle; at the 38.2% Fibonacci retracement level of the rally from March 23, 2020 lows.
    • Stochastic (9,1, 3): %K crossed below %D; potential Bullish Divergence
    • RSI-9 is below 25
  • The week was down -122.53 or -3.0%; the 5-week ATR  is 243.90
  • A down week; seventh in succession and seventh in the previous ten weeks
  • The weekly pivot point=3934.13, R1=4057.95, R2=4214.53; S1=3777.55, S2=3653.73; S1 pivot level was breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A large green candle with almost no lower shadow and a small upper shadow;
    • Stochastic (9, 1, 3): %K is above %D; above 80
    • RSI-9 is near 60; above 8-day EMA;
  • Above 20-day EMA; below 50-day EMA, 200-day SMA, and 100-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • The downtrend since March 29 with a sequence of lower highs and lower lows – a move above 4089 will break the sequence; broke above a Horizontal channel bounded between 4055.00 and 3856.00 – the 61.8% extension target is near 4195.00 and the 100% extension target is near 4275.00
    • RSI-21 is rising in steps since 4:00 PM on May 18; above 70
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Trending up since 1:30 PM on May 20 after making a V-shaped move
    • RSI-21 is moving above 60
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 3:45 AM
  • The Bollinger Band is expanding a bit
  • Breaking above Cup-With-Handle pattern
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Thursday, May 26, in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in higher volume.

Major indices opened higher and then moved further up for the rest of the day. All but one – Real Estate – S&P sectors closed higher.

From Briefing.com:

Today was a good day for the stock market. Bulls had control of the tape from the opening bell to the closing bell, which rang with the major indices sitting near their best levels of the day.

[…]

Sure enough, the S&P 500 consumer discretionary sector (+4.8%) was the star today in a star-studded lineup of sector performances that also included the outperformance of the information technology (+2.5%), financial (+2.3%), and communication services (+2.1%) sectors.

[…]
  • For the week ending May 21, initial claims decreased by 8,000 to 210,000 (Briefing.com consensus 210,000). Continuing claims for the week ending May 14 increased by 31,000 to 1.346 million.
  • […]
  • The second estimate for Q1 GDP was revised down to show real GDP decreasing at an annual rate of 1.5% (Briefing.com consensus -1.3%) from the advance estimate of -1.4%. The GDP Chain Deflator was revised up to 8.1% (Briefing.com consensus 8.0%) from 8.0%.
  • […]
  • Pending home sales declined 3.9% month-over-month in April following a downwardly revised 1.6% decline (from -1.2%) in March.
[…]
  • Dow Jones Industrial Average -10.0% YTD
  • S&P 500 -14.9% YTD
  • S&P 400 -12.6% YTD
  • Russell 2000 -18.1% YTD
  • Nasdaq Composite -25.0% YTD

Overseas: 

  • Europe: DAX +1.6%, FTSE +0.6%, CAC +1.8%
  • Asia: Nikkei -0.3%, Hang Seng -0.3%, Shanghai +0.5%

Commodities: 

  • Crude Oil +3.53 @ 114.13
  • Nat Gas -0.10 @ 8.81
  • Gold +2.00 @ 1847.60
  • Silver +0.08 @ 21.95
  • Copper +0.00 @ 4.26
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