Market Remarks

Morning Notes – Tuesday, February 28, 2023

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM; retraced more than 15 points  since 7:15 AM after advancing more than 30 since 3:15 AM
  • The odds are for a choppy up day – watch for breaks above 4003.75 or a break below 3989.00 for clarity
  • The major economic data report is due during the day:
    • Prelim Wholesale Inventories ( -0.4% vs. 0.1% est.; prev. 0.1%) at 8:30 AM
    • Goods Trade Balance ( -91.5B vs. -90.6B est.; prev. -89.7B) at 8:30 AM
    • HPI ( -0.1%B vs. -0.2% est.; prev. -0.1%) at 9:00 AM
    • S&P/CS Composite-20 HPI ( 4.6% vs. 4.7% est.; prev. 6.8%) at 9:00 AM
    • Chicago PMI ( 45.6 est.; prev. 44.3) at 9:45 AM
    • CB Consumer Confidence ( 108.5 est.; prev. 107.1 ) at 10:00 AM
    • Richmond Manufacturing Index ( -5 est.; prev. -11) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3973.55, 3956.82, and 3949.34
  • Critical resistance levels for S&P 500 are 4000.47, 4018.05, and 4028.30
  • The key levels for E-mini futures are a break above 4003.75, the high at 7:15 AM, and a break below 3989.00, the low at 8:30 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (March 2023) closed at 3988.25, and the index closed at 3982.24 – a spread of about +6.00 points; the futures closed at 3988.00; the fair value is +0.25
  • Pre-NYSE session open, futures were mixed – at 8:45 AM, S&P 500 futures were up by +3.00, Dow up by +37, and NASDAQ down by -3.00

Markets Around The World

  • Markets in the East closed mixed
  • European markets are mostly higher
  • 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 lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 3.947, up +23.0 basis points from two weeks ago;
    • The 30-year is at 3.957%, up +16.6 basis points;
    • The 2-year yield is at 4.791%, up +25.0 basis points;
    • The 10-Year-&-2-Year spread is at -0.844, down from -0.844
    • The 30-Year-&-10-Year spread is at 0.010, down from 0.074
  • VIX
    • At 20.77 @ 7:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 23.63 on February 22; low = 18.11 on February 15
    • Sentiment: Risk-On

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

Weekly:
  • The week ending on February 24 was a red candle with a small lower shadow and almost no upper shadow
    • Stochastic (9,1, 3): %K is below the %D;
    • RSI-9 is just below 50
  • The week was down -109.05 or 2.7%; the 5-week ATR  is 137.72
  • A down week, third in the last five weeks, and sixth  in the previous ten weeks;
  • The weekly pivot point=3988.49, R1=4033.90, R2=4097.76; S1=3924.63, S2=3879.22; S1/S2 pivot levels were breached
  • At/below 10-week EMA; above 39-week SMA; below 89-week SMA
  • Uptrend Under Pressurere
Daily
  • A red candle with an upper shadow longer than the lower shadow just below the uptrend line from October 13, 2022, low.
    • Stochastic (9, 1, 3): %K is just above the %D;
    • RSI-9 is just below 40; below 8-DMA
  • Below 20-day EMA and 50-day EMA; above 100-day SMA and 200-day SMA;
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Trending down since the high of 4208.50 reached at 2:00 PM on February 2 – lower lows and lower highs; bounced up more than 50 points from 3947.50 on February 24
  • Broke below a descending triangle 1t 4:00 AM on February 21 – the 61.8% extension target near 3970.00 is achieved, and the 100% extension target is near 3914.00;
    • RSI-21 is around 55
    • Above EMA20, but below EMA10 of EMA50
  • Bias:  Down-Side
30-Minute (E-mini futures)
  • Bouncing up after retracing the 61.8% of the up move from 3947.50 on Friday to 3972.25 on Monday;
  • Broke above a down-sloping flag at 5:00 AM – the 61.8% extension target is near 4020.00, and the 100% extension target is near 4050.00 – the pattern failure is below 3980.00
    • RSI-21 is declining from 60
    • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving up  since 5:30 AM
  • The Bollinger Band has been expanding since 5:20 AM – the price first walked up the upper band and then declined to the middle band
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Monday, February 27, in mostly lower volume. Dow Jones Transportation Average traded in higher volume.

Most major indices closed much lower than their opening levels. Main indices gapped up at the open and treaded higher for the first hour of trading. The next hour saw them decline to below the opening level. They traded sideways to down for the rest of the day.

From Briefing.com:

[…]

The 2-yr note yield, which hit 4.86% overnight, settled at 4.80%. The 10-yr note yield, which hit 3.96% overnight, settled at 3.93%.

The main indices exhibited some fairly strong upside momentum in the early going, likely driven by some short-covering activity, that had the S&P 500, Dow, and Nasdaq up 1.2%, 1.1%, and 1.5%, respectively, at their morning highs.

That momentum quickly dissipated, though, and the market spent most of the session in a steady grind lower. The main indices ultimately settled off their lows for the day

[…]

Shortly after the open, advancers led decliners by a nearly 5-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq. By the close, advancers led decliners by a roughly 4-to-3 margin at both the NYSE and the Nasdaq.

Most of the S&P 500 sectors closed with a gain led by consumer discretionary (+1.2%) and industrials (+0.8%).

[…]

On the flip side, utilities (-0.8%) and health care (-0.3%) suffered the steepest losses.

  • Nasdaq Composite: +9.6% YTD
  • Russell 2000: +7.7% YTD
  • S&P Midcap 400: +7.2% YTD
  • S&P 500: +3.7% YTD
  • Dow Jones Industrial Average: -0.8% YTD
[…]
  • Durable goods orders declined 4.5% month-over-month in January (Briefing.com consensus -3.9%) following a downwardly revised 5.1% increase (from 5.6%) in December. Excluding transportation, durable goods orders rose 0.7% month-over-month (Briefing.com consensus +0.1%) following a downwardly revised 0.4% decline (from -0.1%) in December.
  • […]
  • Pending home sales rose 8.1% in January (Briefing.com consensus +1.0%) following a revised 1.1% increase in December (from +2.5%).
[…]

Overseas: 

  • Europe: DAX +1.1%, FTSE +0.7%, CAC +1.5%
  • Asia: Nikkei -0.1%, Hang Seng -0.3%, Shanghai -0.3%

Commodities: 

  • Crude Oil -0.70 @ 75.71
  • Nat Gas +0.34 @ 2.84
  • Gold +7.40 @ 1824.40
  • Silver -0.05 @ 20.78
  • Copper +0.05 @ 4.01
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