Market Remarks

Morning Notes – Tuesday, August 2, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM; trending down since 10:30 AM on Monday
  • The first nine days of August are historically weak (Stock Trader’s Almanac)
  • The odds are for a down day with elevated volatility – watch for a break above 4106.50 and above 4122.25 for a change of sentiments
  • The key economic data report due during the day:
    • JOLTS Job Openings ( 10.99M est.; prev. 11.25M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4096.02, 4091.61, and 4079.22
  • Critical resistance levels for S&P 500 are 4115.54, 4129.30, and 4144.88
  • Key levels for E-mini futures: break above 4106.50, the high at 1:00 AM and a break below 4083.50, the low at 6:30 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (September 2022) closed at 4119.75,  and the index closed at 4118.63 – a spread of about +1.00 points; the futures closed at 4120.50; the fair value is -0.75
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -28.75, Dow by -197; and NASDAQ by -125.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Tokyo, and Seoul closed lower
  • European markets are mostly lower – Spain is higher
  • Currencies (Compared to two weeks ago):
  • Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 2.548%, down -41.2 basis points from two weeks ago;
    • The 30-year is at 2.973%, down -26.2 basis points;
    • The 2-year yield is at 2.868%, down -26.0 basis points;
    • The 10-Year-&-2-Year spread is at -0.320, up from -0.168
    • The 30-Year-&-10-Year spread is at 0.325, up from 0.175
  • VIX
    • At 24.19 @ 8:00 AM; up from the last close; above the 5-day SMA;
    • Recent high = 29.06 on July 13; low = 21.21 on July 29
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on July 29 was a relatively large green candle
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI-9 is above 50 after making a Bullish Divergence on June 13
  • The week was up +168.47 or +4.3%; the 5-week ATR  is 196.93
  • An up week; third in the least five weeks, and fifth in the previous ten weeks;
  • The weekly pivot point=4060.39, R1=4210.05, R2=4289.80; S1=3980.64, S2=3830.98; R1/R2 pivot levels were breached
  • Above 10-week EMA, below 39-week SMA, and 89-week SMA
  • Uptrend
Daily
  • A small Harami Doji at the 100-day SMA; broke above a symmetrical triangle  on July 19 – the 61.8% extension target near 4070.00 is achieved, the 100% extension target is near 4190.00, and the 161.8% extension target is near 4380.00;  the 100% extension target for the ABCD pattern near 4025.00 is achieved, and the 161.8% extension target is near 4216.00
    • Stochastic (9, 1, 3): %K crossed below %D; above 90
    • RSI-9 turned down above 70; above 8-day EMA;
  • Above 20-day EMA and 50-day EMA; at 100-day SMA; below 200-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • Moving sideways to down since 10:00 AM on July 29; the uptrend since 10:00 AM on July 14; broke above a Descending Triangle on July 19 – the 100% extension target near 4105.00 is achieved, and the 161.8% extension target is near 4235.00
    • RSI-21 has declined to below 40 from above 90 after making a Bearish Divergence at 2:00 PM on July 29
    • Below EMA20, but above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting down since 10:30 AM on Monday
    • RSI-21 is trending down since 4:30 PM on July 28; made Bearish Divergence on Monday
    • 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 2:00 PM on Monday
  • The Bollinger Band is narrow and relatively stable
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Monday, August 1, in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume. Transports closed higher. Most major indices made Harami Dojis.

From Briefing.com:

[…]

Higher growth areas outpaced the broader market in the early going on the heels of the July ISM Manufacturing Index before losing their influence by the close.

[…]

The 2s10s inversion widened today with the 10-yr note yield falling four basis points to 2.61% while the 2-yr note yield rose one basis point to 2.91%.

[…]

The Vanguard Mega Cap Growth ETF (MGK), which was up 0.9% this morning, closed down 0.2% and just a hair in front of the S&P 500. The PHLX Semiconductor Index was up 1.3% at its high but closed with a modest gain of 0.4%.

[…]

The defensive-oriented consumer staples sector (+1.2%) was at the top of the leaderboard

[…]

The energy sector (-2.2%) was the top laggard in the face of falling oil prices. WTI crude oil futures fell 4.7% to $93.93/bbl. Natural gas futures fell 0.7% to $8.26/mmbtu. Unleaded gasoline futures fell 3.2% to $3.00/gal.

[…]
  • July IHS Markit Manufacturing PMI – Final 52.2%; Prior 52.3%
  • July ISM Manufacturing Index 52.8% (Briefing.com consensus 52.5%); Prior 53.0%
  • […]
  • June Construction Spending -1.1% (Briefing.com consensus 0.2%); Prior was revised to 0.1% from -0.1%
[…]

Dow Jones Industrial Average: -9.7% YTD
S&P 400: -11.6% YTD
S&P 500: -13.6% YTD
Russell 2000: -16.1% YTD
Nasdaq Composite: -20.9% YTD

Overseas: 

  • Europe: DAX -0.0%, FTSE -0.1%, CAC -0.2%
  • Asia: Nikkei +0.7%, Hang Seng +0.1%, Shanghai +0.2%

Commodities: 

  • Crude Oil -4.62 @ 93.93
  • Nat Gas -0.06 @ 8.30
  • Gold +3.30 @ 1786.30
  • Silver +0.05 @ 20.29
  • Copper -0.05 @ 3.51
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