Market Remarks

Morning Notes – Wednesday, August 3, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:00 AM; trending up since 4:00 AM – up more than 25 points since then
  • The first nine days of August are historically weak (Stock Trader’s Almanac)
  • The odds are for an up day with elevated volatility – watch for a break below 4106.50 for a change of sentiments
  • The key economic data report due during the day:
    • Final Services PMI ( 47.0 est.; prev. 47.0) at 9:45 AM
    • ISM Services PMI ( 53.5 est.; prev. 55.3) at 10:00 AM
    • Factory Orders ( 1.3% est.; prev. 1.6%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4090.24, 4079.81, and 4065.44
  • Critical resistance levels for S&P 500 are 4118.43, 4140.47, and 4144.88
  • Key levels for E-mini futures: break above 4121.00, the high at 2:30 PM on Tuesday and a break below 4106.50, the low at 6:30 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2022) closed at 4094.00,  and the index closed at 4091.19 – a spread of about +2.75 points; the futures closed at 4093.75; the fair value is +0.25
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were p by +17.75, Dow by +152; and NASDAQ by +59.25

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Sydney closed lower
  • European markets are mostly higher – Itlay and STOXX 600 are lower
  • Currencies (Compared to two weeks ago):
  • Up Down
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • INR/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are higher
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 2.741%, down -27.8 basis points from two weeks ago;
    • The 30-year is at 2.985%, down -19.4 basis points;
    • The 2-year yield is at 2.912%, down -33.4 basis points;
    • The 10-Year-&-2-Year spread is at -0.171, up from -0.227
    • The 30-Year-&-10-Year spread is at 0.244, up from 0.160
  • VIX
    • At 23.50 @ 6:30 AM; down from the last close; above the 5-day SMA;
    • Recent high = 29.06 on July 13; low = 21.21 on July 29
    • Sentiment: Risk-On

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 red candle with a small lower shadow and a larger upper shadow 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 is below %D; just below 80
    • RSI-9 is around 65; 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 is moving up since 4:00 AM on Tuesday from just above 30; above 50; Bearish Divergence at 2:00 PM on July 29
    • At/above EMA20, but above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting sideways to down since 9:30 AM on July 29 between 4144.00 and 4089.00
    • RSI-21 is moving along 50
    • Above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up since 9:30 PM
  • The Bollinger Band is expanding a bit since 5:00 AM, with price walking up the upper band
  • Bias: Side

Previous Session

Major U.S. indices closed lower on Tuesday, August 2, in mixed volume. Dow Jones Transportation Average and NASDAQ Composite traded in higher volume. Major indices opened lower but then turned around in the first hour of trading and moved higher. They declined in the afternoon and closed below lower for the day.

From Briefing.com:

[…]

The main indices slipped back from those levels, though, and closed with losses on the day. The Dow Jones Industrial Average was the top laggard, down 1.2%,

[…]

The 2-yr note yield, which hit 2.81% before Daly’s remarks were published, settled at 3.07%. The 10-yr note yield, which touched 2.53%, settled at 2.74%.

The selling pressure that accompanied the rise in yields left all 11 S&P 500 sectors in negative territory with losses ranging from 0.2% (communication services) to 1.3% (real estate).

[…]

Also, WTI crude oil futures settled with modest losses ahead of tomorrow’s OPEC+ meeting, down 0.4% to $94.33/bbl. Unleaded gasoline rose 1.5% to $3.04/gal. Natural gas futures fell 6.6% to $7.71/mmbtu.

[…]

Dow Jones Industrial Average: -10.9% YTD
S&P 400: -12.5% YTD
S&P 500: -14.2% YTD
Russell 2000: -16.1% YTD
Nasdaq Composite: -21.1% YTD

Overseas: 

  • Europe: DAX -0.2%, FTSE -0.1%, CAC -0.4%
  • Asia: Nikkei -1.4%, Hang Seng -2.4%, Shanghai -2.3%

Commodities: 

  • Crude Oil +0.40 @ 94.33
  • Nat Gas -0.55 @ 7.75
  • Gold -2.30 @ 1784.00
  • Silver -0.28 @ 20.01
  • Copper -0.03 @ 3.48
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