Market Remarks

Morning Notes – Friday, August 5, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are sharply lower to the 4105.00 level at 8:50 AM following the Non-Farm Payroll report after moving between 4166.25 and 4146.50 from 1:00 PM on Thursday to 8:30 AM
  • The odds are for a down day with elevated volatility – watch for a break above 4136.00 for a change of sentiments
  • The key economic data report due during the day:
    • Non-Farm Employment Change ( 528K vs. 250K est.; prev. 398K) at 8:30 AM
    • Unemployment Rate ( 3.5% vs. 3.6% est.; prev. 3.6%) at 8:30 AM
    • Average Hourly Earnings ( 0.5% vs. 0.3% est..; prev. 0.4% ) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4113.32, 4107.96, and 4090.24
  • Critical resistance levels for S&P 500 are 4135.43, 4146.95, and 4160.63
  • Key levels for E-mini futures: break above 4136.00, the low at 10:30 AM on Thursday and a break below 4100.00, the low at 4:00 AM on Wednesday

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2022) closed at 4153.25,  and the index closed at 4151.94 – a spread of about +1.25 points; the futures closed at 4152.25; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -28.75, Dow by -127; and NASDAQ by -113.00

Markets Around The World

  • Markets in the East closed higher
  • European markets are mostly lower – Spain and Switzerland are 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 mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 2.676%, down -23.4 basis points from two weeks ago;
    • The 30-year is at 2.961%, down -11.2 basis points;
    • The 2-year yield is at 3.054%, down -4.6 basis points;
    • The 10-Year-&-2-Year spread is at -0.378, down from -0.190
    • The 30-Year-&-10-Year spread is at 0.285, up from 0.134
  • VIX
    • At 22.44 @ 8:45 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 candle with a small lower shadow and a smaller upper shadow at the June 2 high resistance; 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 turned down above %D; above 80
    • RSI-9 is above 70 above 8-day EMA;
  • Above 20-day EMA, 50-day EMA, and 100-day SMA; below 200-day SMA;
  • Uptrend
2-Hour (E-mini futures)
  • Moving sideways since 12:00 PM on August 3; 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 above 75; Potential Bearish Divergence
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting sideways since 12:30 PM on August 3 between 4174.00 and 4136.00
    • RSI-21 is moving below 50
    • Below EMA10 of EMA50, which is at/below EMA20
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting down since 4:00 AM after moving from2:30 PM on Thursday.
  • The Bollinger Band is expanding a bit since 4:00 AM, with price walking down the lower band.
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Thursday, August 4, in lower volume. NASDAQ Composite and Dow Jones Transportation Average traded closed higher. The day’s price range was small. The major indices opened lower and then moved within a narrow range for the rest of the day. The indices are at resistance levels – prior highs and 10-day SMA.

From Briefing.com:

[…]

Brazil’s central bank raised its key policy rate by 50 basis points to 13.75% and the Bank of England raised its key policy rate by 50 basis points to 1.75%. The BOE also forecast a recession in the UK starting in the fourth quarter […]

WTI crude oil futures settled down 2.7% to $88.49/bbl. Natural gas futures settled down 2.1% to $8.13/mmbtu. Unleaded gasoline futures settled down 4.8% to $2.79/gal.

This resulted in the S&P 500 energy sector (-3.6%) lagging by a wide margin.

Aside from energy, the worst performing sector was consumer staples (-0.8%),

[…]

The PHLX Semiconductor Index closed up 0.9% with most components exhibiting gains

[…]

Another bright spot in the market was the consumer discretionary sector (+0.5%).

[…]

Advancers led decliners by a 7-to-5 margin at the Nasdaq while decliners led advancers by an 11-to-10 margin at the NYSE.

Separately, Treasury yields pulled back today. The 2-yr note yield fell six basis points to 3.04% while the 10-yr note yield fell seven basis points to 2.68%.

[…]
  • Initial jobless claims for the week ending July 30 increased by 6,000 to 260,000. That was in-line with the Briefing.com consensus estimate. Continuing claims for the week ending July 23 increased by 48,000 to 1.416 million.
  • […]
  • The trade deficit narrowed to $79.6 billion (Briefing.com consensus -$81.7 billion) from an upwardly revised $84.9 billion (from $85.5 billion) in May. That narrowing was the result of exports being $4.3 billion more than May exports and imports being $1.0 billion less than May imports.
[…]

Dow Jones Industrial Average: -9.9% YTD
S&P 400: -12.4% YTD
S&P 500: -12.9% YTD
Russell 2000: -15.1% YTD
Nasdaq Composite: -18.7% YTD

Overseas: 

  • Europe: DAX +0.6%, FTSE +0.0%, CAC +0.6%
  • Asia: Nikkei +0.7%, Hang Seng +2.1%, Shanghai +0.8%

Commodities: 

  • Crude Oil -2.42 @ 88.49
  • Nat Gas -0.18 @ 8.13
  • Gold +28.70 @ 1807.40
  • Silver +0.17 @ 20.14
  • Copper +0.02 @ 3.49
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