Market Remarks

Morning Notes – Tuesday, July 12, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are a bit lower at 9:00 AM; moving up since 3:30 AM – up almost 30 points
  • The odds are for an up day with elevated volatility – watch for a break below 3834.00 for a change of sentiments
  • No key economic data report due during the day:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3854.79, 3837.97, and 3809.37
  • Critical resistance levels for S&P 500 are 3880.05, 3897.04, and 3915.31
  • Key levels for E-mini futures: break above 3865.00, the high at 8:00 PM on Monday and a break below 3834.00, the low at 8:15 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (September 2022) closed at 3857.75, and the index closed at 3854.43 – a spread of about +3.75 points; the futures closed at 3856.75; the fair value is +1.00
  • Pre-NYSE session open, futures are mixed – at 9:00 AM, S&P 500 futures were down by -6.00, Dow down by -123; and NASDAQ up by +47.25

Markets Around The World

  • Markets in the East closed mostly lower – Sydney and Singapore closed higher
  • European markets are mostly down- France and STOXX 600 are up
  • 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 lower
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 2.906%, down -28.8 basis points from two weeks ago;
    • The 30-year is at 3.106%, down -19.9 basis points;
    • The 2-year yield is at 3.090%, down -3.3 basis points;
    • The 10-Year-&-2-Year spread is at -0.184, up from 0.071
    • The 30-Year-&-10-Year spread is at 0.200, up from 0.111
  • VIX
    • At 26.8 @ 8:30 AM; up from the last close; above the 5-day SMA;
    • Recent high = 35.05 on June 13; low = 24.43 on July 8
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on July 8 was a green candle with a small lower shadow and a smaller upper shadow
    • Stochastic (9,1, 3): %K is above %D; around 40
    • RSI-9 is above 40 after making a Bullish Divergence on June 13
  • The week was up +74.05 or +1.9%; the 5-week ATR  is 231.01
  • An up week; second in the least five weeks and third in the previous ten weeks; 11 of the last 14 weeks were down
  • The weekly pivot point=3853.31, R1=39648.57, R2=4029.75; S1=3788.13, S2=3676.87; no pivot levels were breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A small red candle with almost no upper and lower shadows; a three-day Evening Star pattern is emerging after a small rally.
    • Stochastic (9, 1, 3): %K crossed below %D;
    • RSI-9 is just below 50; above 8-day EMA;
  • Below 20-day EMA; below 50-day EMA, 200-day SMA, and 100-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Broke above a Horizontal Channel on July 6 – achieved 100.0% extension target near 3922.00 and the 161.8% extension target is near 3977.00; bouncing off the broken upper limit of the channel after declining from the high of July 8
    • RSI-21 breaking above a downtrend line; just below 50
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Trending down since 11:00 AM on July 8;
    • RSI-21 is rising since 3:00 AM; above 50
    • Above EMA20, but below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 7:00 AM
  • The Bollinger Band is expanding a bit since 7:00 AM, with the price near the upper band
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday, July 11, in mixed volume. Dow Jones Industrial Average and Russell 2000 traded in higher volume. Major indices gapped down at the open and then declined in the first hour of trading. They then rose but did not close the gap before declining in the late afternoon and closing near the lows for the day.

From Briefing.com:

The stock market opened on a low note and couldn’t find the upside momentum to shake those losses. The major indices all closed near session lows as market participants are likely hesitant ahead of Wednesday’s CPI report. […]

The mega caps were an important downside driver with the Vanguard Mega Cap Growth ETF (MGK) closing down 1.9% versus a 1.2% loss in the S&P 500. The Invesco S&P 500 Equal Weight ETF (RSP), for its part, closed down 0.9%.

[…]

Buyers showed reluctance this session with declining issues leading advancing issues by a 5-to-2 margin at the NYSE and a roughly 3-to-1 margin at the Nasdaq.

Nine of the 11 S&P 500 sectors closed in negative territory. The holdouts in the green were real estate (+0.1%) and utilities (+0.6%). Countercyclical sectors, consumer staples (-0.2%) and health care (-0.2%), also closed ahead of the S&P 500, though in negative territory.

Influential groups like technology (-1.3%), consumer discretionary (-2.3%), and communication services (-2.3%) dotted the bottom of today’s leaderboard.

[…]

The 2s10s spread stayed inverted with the 2-yr note yield settling down six basis points to 3.06% and the 10-yr note yield settling down 11 basis points to 2.99%.

The energy complex settled mostly higher, though WTI crude oil futures fell 1.3% to $103.74/bbl. Natural gas futures rose 5.9% to $6.32/mmbtu. Unleaded gasoline futures rose 0.2% to $3.46/gal.

[…]
  • Dow Jones Industrial Average: -14.2% YTD
  • S&P 400: -19.4% YTD
  • S&P 500: -19.1% YTD
  • Russell 2000: -22.9% YTD
  • Nasdaq Composite: -27.3% YTD

Overseas: 

  • Europe: DAX -1.4%, FTSE 0.0%, CAC -0.6%
  • Asia: Nikkei +1.1%, Hang Seng -2.8%, Shanghai -1.3%

Commodities: 

  • Crude Oil -1.32 @ 103.74
  • Nat Gas +0.35 @ 6.31
  • Gold -9.70 @ 1732.90
  • Silver -0.16 @ 19.06
  • Copper -0.08 @ 3.42
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