Market Remarks

Morning Notes – Wednesday, October 19, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; moved down more than 50 points since 6:00 AM;
  • The odds are for a down day with elevated volatility – watch for a break above 3722.00 and a break above 3739.25 for a change of sentiments
  • The key economic data report is due during the day:
    • Building Permits ( 1.56M vs. 1.52M est.; prev. 1.54M ) at 8:30 AM
    • Housing Starts ( 1.44M vs. 1.46M est.; prev. 1.57M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3686.53, 3689.13, and 3657.48
  • Critical resistance levels for S&P 500 are 3722.41, 3733.86, and 3762.79
  • Key levels for E-mini futures: break above 3739.25, the high at 7:00 AM, and a break below 3697.25, the low of 11:30 AM on Tuesday

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2022) closed at 3733.75, and the index closed at 3719.98 – a spread of about +13.75 points; the futures closed at 3732.75; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 8:00 AM, S&P 500 futures were down by -21.25, Dow by -140, and NASDAQ by -58.25

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Seoul, and Singapore closed lower; Tokyo, Sydney, and Mumbai closed higher
  • 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 lower
    • Precious metals are lower
    • Industrial metals are lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.106%, up +48.9 basis points from two weeks ago;
    • The 30-year is at 4.089%, up +40.2 basis points;
    • The 2-year yield is at 4.443%, up +34.2 basis points;
    • The 10-Year-&-2-Year spread is at -0.337, up from -0.484
    • The 30-Year-&-10-Year spread is at -0.017, down from 0.070
  • VIX
    • At 31.33 @ 7:45 AM; up from the last close; at/below the 5-day SMA;
    • Recent high = 34.88 on September 28; low = 28.50 on October 5
    • Sentiment: Risk-Off

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 red Spinning Top Candle that gapped up;
    • Stochastic (9, 1, 3): %K is above %D;
    • RSI-9 s above 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)
  • Retreating from near the top of a Horizontal Channel after bouncing from the low of 3502.00 on October 13
    • RSI-21 has declined from near 80 to below 40;
    • Below EMA20, but above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Drifting lowers since 9:30 PM from 3774.25 and making a Double Top; broke below a Symmetrical Triangle at 7:00 AM – the 61.8% extension target is near 3672.00, and the 100% extension target is near 3642.00
    • RSI-21 is below 40
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is drifting down since 10:00 PM
  • The Bollinger Band is expanding since 6:45 AM, with the price walking down the lower band
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Tuesday, October 18, in higher volume. The major indices gapped higher at the open. They then declined before advancing again in the afternoon. Most made Spinning Stop or Doji candles. All S&P sectors closed higher.

From Briefing.com:

[…]

The Dow, Nasdaq, and S&P 500 were up 2.2%, 2.8%, and 2.3%, respectively, at this morning’s highs. The major averages took a sharp turn lower after the 10-yr Treasury note yield breached 4.00%. They recovered from session lows as selling eased up in the Treasury market and the S&P 500 found support at the 3,700 level.

[…]

Stocks recovered as selling abated in the Treasury market and the 10-yr note yield ultimately settled at 4.00%. The 2-yr note yield settled at 4.44%.

[…]

A broad rally effort left all 11 S&P 500 sectors in positive territory. Industrials (+2.4%) held the top spot

[…]

The advance-decline line favored advancers by a greater than 2-to-1 margin at the NYSE and roughly the same margin at the Nasdaq.

[…]
  • Total industrial production increased 0.4% month-over-month in September (Briefing.com consensus 0.1%) following an upwardly revised 0.1% decline (from -0.2%) in August. The capacity utilization rate increased to 80.3% (Briefing.com consensus 79.9%) from an upwardly revised 80.1% (from 80.0%) in August.
  • […]
  • October NAHB Housing Market Index came in at 38 (Briefing.com consensus 44) after a prior reading of 46

Dow Jones Industrial Average: -16.0% YTD
S&P Midcap 400: -17.6% YTD
S&P 500: -22.0% YTD
Russell 2000: -21.8% YTD
Nasdaq Composite: -31.1% YTD

Overseas: 

  • Europe: DAX +0.9%, FTSE +0.2%, CAC +0.4%
  • Asia: Nikkei +1.4%, Hang Seng +1.8%, Shanghai -0.1%

Commodities: 

  • Crude Oil -3.27 @ 82.22
  • Nat Gas -0.26 @ 5.73
  • Gold -0.20 @ 1657.30
  • Silver +0.07 @ 18.63
  • Copper -0.03 @ 3.36
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