Market Remarks

Morning Notes – Friday, October 14, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; they have moved up more than 50 points since 8:00 AM;
  • The odds are for an up day with elevated volatility – watch for a break below 3692.25 for a change of sentiments
  • The key economic data report is due during the day:
    • Retail Sales ( 0.0% vs. 0.2% est.; prev. 0.4%) at 8:30 AM
    • Core Retail Sales ( 0.1% vs. -0.1% est.; prev. -0.1%) at 8:30 AM
    • Prelim UoM Consumer Sentiments ( 58.7 est.; prev. 58.6) at 10:00 AM
    • Prelim UoM Inflation Expectations ( prev. 4.6%) at 10:00 AM
    • Business Inventories ( 0.9% est.; prev. 0.6%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3685.41, 3650.71, and 3609.36
  • Critical resistance levels for S&P 500 are 3722.66, 3741.22, and 3779.92
  • Key levels for E-mini futures: break above 3715.50, the high of 11:45 PM and a break below 3672.50, the low of 8:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (December 2022) closed at 3682.00, and the index closed at 3669.91 – a spread of about +12.00 points; the futures closed at 3681.75; the fair value is +0.25
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +25.00, Dow by +200, and NASDAQ by +80.00

Markets Around The World

  • Markets in the East closed mostly higher – Singapore closed lower
  • European markets are higher
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • EUR/USD
  • AUD/USD
  • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are higher
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.875%, up +12.8 basis points from two weeks ago;
    • The 30-year is at 3.872%, up +17.9 basis points;
    • The 2-year yield is at 4.472%, up +25.5 basis points;
    • The 10-Year-&-2-Year spread is at -0.597, down from -0.470
    • The 30-Year-&-10-Year spread is at -0.003, up from -0.054
  • VIX
    • At 31.63 @ 8:30 AM; down from the last close; below the 5-day SMA;
    • Recent high = 34.88 on September 28; low = 28.50 on October 5
    • Sentiment: Risk-Neutral-On

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

Weekly:
  • The week ending on October 7 was a Shooting Str candle, albeit after almost no advance; near a support level around the low of June 13 week
    • Stochastic (9,1, 3): %K crossed above %D; below ten
    • RSI-9 is just above 35
  • The week was down -180.15 or -4.7%; the 5-week ATR  is 212.40
  • An up week; second in the last five weeks, and fourth in the previous ten weeks;
  • The weekly pivot point=3683.83, R1=3762.74, R2=3885.81; S1=3560.76, S2=3481.85; R1/R2 pivot levels were breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A large Bullish Engulfing candle at the 50% retracement of the rally from March 2020 to December 2021
    • Stochastic (9, 1, 3): %K crossed above %D;
    • RSI-9 moved above 30 after making a Bullish Divergence; above 8-day EMA;
  • Below 20-day EMA, 50-day EMA, 100-day SMA, and 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Bounced up from a low of 3502.00 after breaking below a Horizontal Channel; back within the channel
    • RSI-21 bounced up to above 70 after making a Bullish Divergence at 8:00 AM on Thursday; down to just below 60
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Bounced up above a sideways move after breaking below it on Thursday; moving sideways since 3:00 PM around 3690.00
    • RSI-21 is moving above 50
    • At/below EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 4:00 PM
  • The Bollinger Band is a bit expanded, with the price moving around the middle band
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Thursday, October 13, in higher volume. The major indices gapped down at the open; however, they staged a  dramatic reversal in the first half of trading and mostly traded higher. The major indices made Bullish Engulfing candles at or below support levels.

From Briefing.com:

[…]

The September Consumer Price Index (CPI) came in hotter-than-expected and the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average fell 2.4%, 3.2%, and 1.9%, respectively, shortly after today’s open. The stock market staged a big comeback, however, after the S&P 500 broke below 3,500. The Nasdaq Composite and the S&P 500 both snapped a six-session losing streak.

[…]

The U.S. Dollar Index, which peaked at 113.92 shortly after the CPI report, was down 0.7% to 112.50 with GBP/USD +1.9% to 1.1315 and EUR/USD +0.8% to 0.9776.

[…]

The 10-yr note yield, which reached 4.07% this morning, settled at 3.95%.  The 2-yr note yield, which jumped to 4.52% this morning, settled at 4.45%.

[…]
  • Total CPI rose 0.4% in September (Briefing.com consensus 0.2%) following a 0.1% increase in August. Core CPI, which excludes food and energy, rose 0.6% in September (Briefing.com consensus 0.4%) following a 0.6% increase in August. On a year-over-year basis, total CPI was up 8.2%, versus 8.3% in August, but core CPI was up 6.6% versus 6.3% in August.
  • […]
  • Weekly initial jobless claims totaled 228,000 (Briefing.com consensus 225,000) from last week’s total of 219,000. Continuing claims totaled 1.368 million after last week’s revised total of 1.365 million (from 1.361 million).
  • […]
  • Weekly EIA Natural Gas Inventories showed a build of 125 bcf versus a build of 129 bcf last week
  • Weekly EIA Crude Oil Inventories showed build on 9.88 million barrels after a 3.36 million barrel draw last week

Dow Jones Industrial Average: -17.3% YTD
S&P Midcap 400: -19.0% YTD
S&P 500: -23.0% YTD
Russell 2000: -23.0% YTD
Nasdaq Composite: -31.9% YTD

Overseas: 

  • Europe: DAX +1.5%, FTSE +0.4%, CAC +1.0%
  • Asia: Nikkei -0.6%, Hang Seng -1.9%, Shanghai -0.3%

Commodities: 

  • Crude Oil +1.80 @ 89.02
  • Nat Gas +0.27 @ 6.72
  • Gold -10.40 @ 1674.00
  • Silver -0.22 @ 18.85
  • Copper +0.04 @ 3.46
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