Market Remarks

Morning Notes – Tuesday, October 18, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 8:45 AM; moved up more than 45 points since 5:30 AM;
  • The odds are for an up day with elevated volatility – watch for a break below 3737.00 for a change of sentiments
  • The key economic data report is due during the day:
    • Capacity Utilization ( 80.0% est.; prev. 80.5%) at 9:15 AM
    • Industrial Production ( 0.1% est.; prev. -0.2%) at 9:15 AM
    • NAHB Housing Market Index ( 43 est.; prev. 46) at10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3739.22, 3712.00, and 3689.13
  • Critical resistance levels for S&P 500 are 3779.44, 3806.91, and 3829.10
  • Key levels for E-mini futures: break above 3794.00, the high at 11:30 AM on October 6, and a break below 3737.00, the low of 6:45 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (December 2022) closed at 3690.00, and the index closed at 3677.95 – a spread of about +12.00 points; the futures closed at 3689.25; the fair value is +0.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +76.50, Dow by +535, and NASDAQ by +244.25

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai closed lower
  • European markets are higher
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • EUR/USD
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • INR/USD
  • AUD/USD
  • NZD/USD
  • Commodities (Compared to two weeks ago):
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are mostly higher
    • Soft commodities are mixed
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.015%, up +36.4 basis points from two weeks ago;
    • The 30-year is at 4.015%, up +30.9 basis points;
    • The 2-year yield is at 4.452%, up +34.3 basis points;
    • The 10-Year-&-2-Year spread is at -0.437, down from -0.458
    • The 30-Year-&-10-Year spread is at 0.000, down from 0.055
  • VIX
    • At 31.04 @ 6:45 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-On

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

Weekly:
  • The week ending on October 14 was a red Spinning Top with upper and lower shadows bigger than the real body; at/below a support level around the low of June 13 week
    • Stochastic (9,1, 3): %K is above %D; around ten
    • RSI-9 is just below 35
  • The week was down -56.59 or -1.6%; the 5-week ATR  is 227.22
  • A down week; fourth in the last five weeks, and seventh in the previous ten weeks;
  • The weekly pivot point=3595.55, R1=3699.52, R2=3815.97; S1=3479.10, S2=3375.13; S1 pivot level was breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A small green Harami candle near the open/high of Friday
    • Stochastic (9, 1, 3): %K turned up above %D;
    • RSI-9 turned up to near 50; 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)
  • Continuing the bounce from the low of 3502.00 on October 13 and after breaking below a Horizontal Channel, moved up to near the top of the channel.
    • RSI-21 has declined from above 70;
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving up since 6:00 PM on October 16, forming a Cup-with-a-Handle pattern; a break above 3764.75 will complete the pattern.
    • RSI-21 is above 65
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving up since 7:30 PM on Sunday
  • The Bollinger Band is expanding slightly since 7:45 AM, with the price walking up the upper band
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday, October 17, in mostly lower volume. Dow Jones Transportation Average traded in higher volume. The major indices opened higher and made the day’s high in the first half-hour of trading. Afterward, they moved sideways for the rest of the day. Most indices made green Harami candles near the high/open of the previous day.

From Briefing.com:

[…]

Many stocks moved higher today with the advance-decline line favoring advancing issues by a greater than 4-to-1 margin at the NYSE and a greater than 2-to-1 margin at the Nasdaq.

[…]

All 11 S&P 500 sectors closed in the green with consumer discretionary (+4.2%) showing the biggest gain. That move was bolstered by constructive comments on the state of the consumer from Bank of America following its earnings report. Consumer staples (+1.1%) and energy (+1.2%) brought up the rear.

WTI crude oil futures fell 0.3% today to $85.49/bbl. Natural gas futures fell 7.7% to $5.99/mmbtu.

[…]

The 10-yr note yield dropped to 3.91% earlier but settled up one basis point to 4.02%.  The 2-yr note yield, which hit 4.40% earlier, settled at 4.43%.

[…]

Economic data was limited to the October Empire State Manufacturing Survey, which came in at -9.1 versus the prior reading of -1.5. A number below 0.0 is indicative of a contraction in manufacturing activity in the New York Fed region.

Dow Jones Industrial Average: -16.9% YTD
S&P Midcap 400: -18.8% YTD
S&P 500: -22.8% YTD
Russell 2000: -22.7% YTD
Nasdaq Composite: -31.8% YTD

 

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