Market Remarks

Morning Notes – Wednesday, October 26, 2022

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM; moving down since 7:30 from 3853.50 and a Double Top; broke below the intermediate low of 3835.75 – the 61.8% extension target is near 3824.78, and the 100% extension target is near 3807.03
  • The odds are for a down day with elevated volatility – watch for a break above 3847.50 and a break above 3853.50 for a change of sentiments
  • The key economic data report is due during the day:
    • Goods Trade Balance ( -92.2B vs. -87.4B est.; prev. -87.3B) at 8:30 AM
    • Prelim Wholesale Inventories ( 0.8% vs. 1.0% est.; prev. 1.3% ) at 8:30 AM
    • New Home Sales ( 579K est.; prev. 685K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3824.19, 3791.71, and 3776.91
  • Critical resistance levels for S&P 500 are 3835.98, 3862.85, and 3895.24
  • Key levels for E-mini futures: break above 3847.50, the high at 8:15 AM, and a break below 3830.25, the low of 2:30 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2022) closed at 3870.00, and the index closed at 3859.11 – a spread of about +10.75 points; the futures closed at 3870.25; the fair value is -0.25
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -34.00, Dow by -75, and NASDAQ by -215.25

Markets Around The World

  • Markets in the East closed higher – Mumbai was closed
  • European markets are mostly lower – Germany is up
  • Currencies (Compared to two weeks ago):
Up Down
  • EUR/USD
  • GBP/USD
  • USD/JPY
  • AUD/USD
  • NZD/USD
  • INR/USD
  • Dollar index
  • USD/CHF
  • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are lower
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.071%, up +13.2 basis points from two weeks ago;
    • The 30-year is at 4.204%, up +30.2 basis points;
    • The 2-year yield is at 4.462%, up +16.7 basis points;
    • The 10-Year-&-2-Year spread is at -0.391, down from -0.356
    • The 30-Year-&-10-Year spread is at 0.135, up from -0.037
  • VIX
    • At 28.50 @ 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-Off

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

Weekly:
  • The week ending on October 21 was a green candle with almost no upper and lower shadows; a three-week Morning Star is forming just below the support level around the low of June 13 week
    • Stochastic (9,1, 3): %K is above %D;
    • RSI-9 is above 40
  • The week was up +169.68 or +4.7%; the 5-week ATR  is 206.73
  • An up week; second in the last five weeks, and third in the previous ten weeks;
  • The weekly pivot point=3718.06, R1=3797.48, R2=3842.20; S1=3673.34, S2=3593.92; R1 pivot level was breached
  • Below 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A green candle with almost no upper and lower shadows; broke above a downtrend line from the August 16 high.
    • Stochastic (9, 1, 3): %K is above %D near 100;
    • RSI-9 is just above 65; above 8-day EMA;
  • Above 20-day EMA and 50-day EMA; below 100-day SMA and 200-day SMA;
  • Uptrend Resumed
2-Hour (E-mini futures)
  • Broke above a Horizontal Channel between 3820.00 and 3570.00 after retreating to its middle – the 61.8% target s near 4004.36, and a 100% extension target is near 4119.25
      • RSI-21 has declined to just below 60 after making a Bearish Divergence on Tuesday
      • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Moving sideways since 4:30 PM on Tuesday, below the close; broke above a Cup-With-A-Handle pattern – the 61.8% extension target near 3843.00 is achieved, and the 100% extension target is near 3908.00
    • RSI-21 is moving around just above 50
    • At/below EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways to up  since 11:00 PM
  • The Bollinger Band is expanding a bit since 8:00 AM, with the price breaking below the lower band
  • Bias:  Up-Side

Previous Session

Major U.S. indices closed higher on Tuesday, October 25, in mostly lower volume. Russell 2000 traded in higher volume. The major indices opened higher and traded higher for most of the day.  All S&P sectors closed up.

From Briefing.com:

[..]

The 10-yr note yield fell 13 basis points to 4.11% and the 2-yr note yield fell two basis points to 4.46%. The S&P 500 closed well above the 3,800 level after dipping below 3,500 on October 13.

[…]

The Vanguard Mega Cap Growth ETF (MGK) closed up 2.3% versus a 1.6% gain in the S&P 500.

[…]

Small and mid cap stocks fared better than their larger peers today. The Russell 2000 (+2.7%) and S&P Mid Cap 400 (+2.5%) showed some of the biggest gains among the indices.

[…]
  • August FHFA Housing Price Index -0.7% (Briefing.com consensus -0.7%); Prior -0.6%
  • August S&P Case-Shiller Home 13.1% (Briefing.com consensus 14.0%); Prior was revised to 16.0% from 16.1%
  • October Consumer Confidence 102.5 (Briefing.com consensus 105.5); Prior was revised to 107.8 from 108.0
[…]

Dow Jones Industrial Average: -12.4% YTD
S&P Midcap 400: -16.1% YTD
S&P 500: -19.0% YTD
Russell 2000: -20.0% YTD
Nasdaq Composite: -28.4% YTD

Overseas: 

  • Europe: DAX +0.9%, FTSE -0.0%, CAC +1.9%
  • Asia: Nikkei +1.0%, Hang Seng -0.1%, Shanghai -0.0%

Commodities: 

  • Crude Oil +0.33 @ 84.97
  • Nat Gas +0.41 @ 5.62
  • Gold +4.50 @ 1658.60
  • Silver +0.18 @ 18.33
  • Copper -0.02 @ 3.40
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