Market Remarks

Morning Notes – Wednesday, August 31, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:00 AM; the futures are drifting higher from 3979.75 since 5:30 AM;
  • The odds are for an up day with elevated volatility – watch for a break below 3979.75 for a change of sentiments
  • The key economic data report due during the day:
    • ADP Non-Farm Employment Change ( 300K est.; prev. 128K ) at 8:15 AM
    • Chicago PMI ( 52.5 est.; prev. 52.1) at 9:45 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3975.62, 3965.21, and 3951.43
  • Critical resistance levels for S&P 500 are 4003.07, 4017.42, and 4044.98
  • Key levels for E-mini futures: break above 4018.25, the high at 12:30 AM and a break below 3979.25, the low at 5:30 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2022) closed at 3986.25, and the index closed at 3986.16 – a spread of about +0.25 points; the futures closed at 3987.50; the fair value is -1.25
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +14.75, Dow by +66, and NASDAQ by +95.25

Markets Around The World

  • Markets in the East closed mixed –  Shanghai, Tokyo, Sydney, and Singapore closed down; Hong Kong and Seoul closed up; Mumbai was closed
  • European markets are lower
  • 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 mixed
    • Precious metals are lower
    • Industrial metals are lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.11%, up +28.6 basis points from two weeks ago;
    • The 30-year is at 3.220%, up +10.7 basis points;
    • The 2-year yield is at 3.429%, up +18.8 basis points;
    • The 10-Year-&-2-Year spread is at -0.319, up from -0.417
    • The 30-Year-&-10-Year spread is at 0.110, down from 0.289
  • VIX
    • At 26.17 @ 8:30 AM; down from the last close; above the 5-day SMA;
    • Recent high = 29.06 on July 13; low = 21.77 on August 25
    • Sentiment: Risk-On-Neutral

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

Weekly:
  • The red candle that gapped down with no lower and upper shadows;
    • Stochastic (9,1, 3): %K is below %D just above 50
    • RSI-9 is below 50
  • The week was down -170.82 or -4.0%; the 5-week ATR  is 152.61
  • A down week; second in the least five weeks and fourth in the previous ten weeks;
  • The weekly pivot point=4106.12, R1=4154.58, R2=4251.50; S1=4009.20, S2=3960.74; S1/S2/S3 pivot levels were breached
  • Above 10-week EMA, below 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A Bearish Engulfing following a Doji; the next support is at 3910.74
    • Stochastic (9, 1, 3): %K is crisscrossing %D below ten
    • RSI-9 is near 30; below 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Trending down since 2:00 PM on August 16; broke below a support level near 4110.00 and the neckline of a Head-&-Shoulder pattern – the 61.8% extension target near 3975.00 is achieved; the 100% extension target is near 3894.00, and the 161.8% extension target is near 3760.00;
    • RSI-21 is at around 40
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Drifting down since 12:30 AM within a downtrend; broke below a second upsloping flag – 61.8% extension target is near 3950.00, and the 100% extension target is near 3910.00
    • RSI-21 has risen above 40 from near 30
    • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting up since 3:30 PM
  • The Bollinger Band is expanding since 3:15 AM – prices first walked down the lower band until 5:30 AM and then bounced up to the middle band
  • Bias: Side-Down

Previous Session

Major U.S. indices closed lower on Tuesday, August 30, in higher volume. The major indices opened up but turned down immediately and then declined for most of the day. Most made Bearish Engulfing candles following a Doji-like candle, indicating greater bearishness.

From Briefing.com:

The stock market continued its selloff today with each of the major indices closing below their respective 50-day moving averages. […]

The S&P 500, the Vanguard Mega Cap Growth ETF (MGK), and the Invesco S&P 500 Equal Weight ETF (RSP) all closed with a 1.1% loss.

Growth and value stocks both suffered notable losses with the Russell 3000 Growth Index closing down 1.1% while the Russell 3000 Value Index closed down 1.2%.

Market breadth reflected the selling bias today. Decliners led advancers by a nearly 4-to-1 margin at the NYSE and a 2-to-1 margin at the Nasdaq.

Every S&P 500 sector closed in the red with losses ranging from 0.4% (financials) to 3.4% (energy).

[…]

The 2-yr Treasury note yield rose four basis points to 3.46% while the 10-yr Treasury note yield was unchanged at 3.11%.

[…]
  • The Conference Board’s Consumer Confidence Index rose to 103.2 in August (Briefing.com consensus 97.4) from a downwardly revised 95.3 (from 95.7) in July. This was the first increase in the index in four months. In the same period a year ago, the Consumer Confidence Index stood at 115.2.
  • […]
  • July JOLTS Job Openings totaled 11.239 million after the prior revised total of 11.04 million (from 10.698).
  • June FHFA Housing Price Index rose 0.1% after the prior revised 1.3% increase (from 1.4%).
  • June S&P Case-Shiller Home Price Index rose 18.6% (Briefing.com consensus 19.0%) following a prior 20.5% increase.

Dow Jones Industrial Average: -12.5% YTD
S&P 400: -13.9% YTD
S&P 500: -16.4% YTD
Russell 2000: -17.4% YTD
Nasdaq Composite: -24.1% YTD

Overseas: 

  • Europe: DAX +0.5%, FTSE -0.9%, CAC -0.2%
  • Asia: Nikkei +1.1%, Hang Seng -0.4%, Shanghai -0.4%

Commodities: 

  • Crude Oil -5.31 @ 91.60
  • Nat Gas -0.25 @ 9.05
  • Gold -13.70 @ 1736.50
  • Silver -0.25 @ 18.31
  • Copper -0.06 @ 3.55
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