Morning Notes – Monday, August 29, 2022

Directional Bias For The Day:

• S&P Futures are lower at 9:00 AM; the futures are moving sideways between 4040.75 and 4006.75 since opening the week with a down gap at 6::00 PM on Sunday
• The odds are for a down day with elevated volatility with a good chance of a sideways to up move from the pre-open level around 4025.00 – watch for a break above 4040.75 and a break below 4006.75 for clarity
• No key economic data report is due during the day:

Directional Bias Before Open:

Key Levels:

• Critical support levels for S&P 500 are 4025.36, 3992.97, and 3967.15
• Critical resistance levels for S&P 500 are 4057.77, 4077.03, and 4099.51
• Key levels for E-mini futures: break above 4040.75, the high at 3:00 AM and a break below 4096.75, the low at 9:15 AM

Pre-Open

• On Friday at 4:00 PM, S&P futures (September 2022) closed at 4059.00, and the index closed at 4057.66 – a spread of about +1.25 points; the futures closed at 4059.50; the fair value is -0.50
• Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -33.75, Dow by -246, and NASDAQ by -126.00

Markets Around The World

• Markets in the East closed mostly lower –  Shanghai closed up
• European markets are lower
• Currencies (Compared to two weeks ago):

• Commodities (Compared to two weeks ago):
  • Energy futures are higher
  • 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 3.087%, up +23.8 basis points from two weeks ago;
  • The 30-year is at 3.232%, up +11.4 basis points;
  • The 2-year yield is at 3.392%, up +13.5 basis points;
  • The 10-Year-&-2-Year spread is at -0.305, down from -0.408
  • The 30-Year-&-10-Year spread is at 0.145, down from 0.269
• VIX
  • At 27.21 @ 8:30 AM; up from the last close; above the 5-day SMA;
  • Recent high = 29.06 on July 13; low = 21.77 on August 25
  • Sentiment: Risk-Off

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

Previous Session

Major U.S. indices closed lower on Friday, August 26, in higher volume. The major indices started to decline after Fed Chair Powell’s speech at the Jackson Hole Conference at 10:00 AM. The decline was sharp and deep across the board.

For the week, the US equities closed lower in mixed volume. The markets in Asia and Europe closed mostly lower. The dollar index closed up. the energy and industrial metal futures were mixed, the precious metals were down, and the soft commodities were mostly up. The US Treasury Yields closed up for the week. All but one S&P sector – Energy – closed lower.

From Briefing.com:

[…] The major indices logged most of their weekly losses during this session. The S&P 500 closed down 4.0% on the week; the Dow Jones Industrial Average closed down 4.2% on the week; the Nasdaq closed down 4.4% on the week. Most stocks sold off today leading every S&P 500 sector to close with losses that ranged from 1.0% (energy) to 4.1% (information technology). […] Energy had the slimmest losses with WTI crude oil futures settling 0.1% higher at $93.13/bbl. Notably, it’s the only sector with gains on the week, up 4.3%. […] The Vanguard Mega Cap Growth ETF (MGK) closed down 4.1% versus a 3.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP). The Russell 3000 Growth Index closed down 3.6% versus a 2.7% loss in the Russell 3000 Value Index. While most stocks trended lower, the CBOE Volatility Index moved markedly higher, up 17.5% or 3.80, to 25.58. […] At the close, decliners led advancers by a nearly 7-to-1 margin at the NYSE and a greater than 4-to-1 margin at the Nasdaq. […] The 2-yr note yield rose one basis point on the day, and 15 basis points on the week, to 3.40%. The 10-yr note yield rose one basis point on the day, and five basis points on the week, to 3.04%. […] Personal income increased 0.2% month-over-month in July (Briefing.com consensus +0.6%) following an upwardly revised 0.7% increase (from 0.6%) in June. Personal spending rose just 0.1% month-over-month (Briefing.com consensus +0.4%) following a downwardly revised 1.0% increase (from 1.1%) in June. The PCE Price Index declined 0.1% month-over-month (Briefing.com consensus +0.1%), which left it up 6.3% year-over-year versus 6.8% in June. The core PCE Price Index, which excludes food and energy, increased 0.1% month-over-month (Briefing.com consensus +0.3%), which left it up 4.6% year-over-year versus 4.8% in June. […] The final August University of Michigan Index of Consumer Sentiment checked in at 58.2 (Briefing.com consensus 55.1). That was better than the preliminary reading of 55.1 and up from the final July reading of 51.5. In the same period a year ago, the Index of Consumer Sentiment stood at 70.3. Dow Jones Industrial Average: -11.2% YTD S&P 400: -12.0% YTD S&P 500: -14.9% YTD Russell 2000: -15.4% YTD Nasdaq Composite: -22.4% YTD