Morning Notes – Tuesday, October 3, 2023

/ October 3, 2023

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM – declined more than 40 points since 4:15 AM high of 4336.75
  • The odds are for a down day with elevated volatility – watch for a break above 4313.75 for a change of sentiments
  • The major economic data reports due during the day:
    • JOLTS Job Openings ( 8.81M est.; prev. 8.83M) at 10:0 AM
    • IBD/TIPP Economic Optimism ( 41.6 est.; prev. 43.2)
  • 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 the S&P 500 are 4260.21, 4238.63, and 4232.43
  • Critical resistance levels for the S&P 500 are 4288.26, 4303.12, and 4333.15
  • The key levels for E-mini futures are 4313.75, the low at 1:00 AM and 4277.00, the low at 12:00 PM on September 27

Pre-Open

  • On Monday at 4:00 PM, S&P futures (December 2023) closed at 4324.75, and the index closed at 4288.39 – a spread of about +36.25 points; the futures closed at 4324.25; the fair value is +0.50
  • Pre-NYSE session open, futures were lower – at 8:45 AM, S&P 500 futures were down by -29.50, Dow by -160, and NASDAQ by -122.75

Markets Around The World

  • Markets in the East closed lower – Shanghai  and Seoul were closed
  • European markets are lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • NZD/USD
  • USD/CAD
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • INR/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 4.731, up +41.2 basis points from two weeks ago;
    • The 30-year is at 4.858%, up +46.2 basis points
    • The 2-year yield is at 5.112%, up +7.1 basis points;
    • The 10-Year-&-2-Year spread is at -0.388, up from -0.722
    • The 30-Year-&-10-Year spread is at 0.126, up from +0.077
  • VIX
    • At 18.45 @ 8:30 AM; up from the last close; above the 5-day SMA;
    • Recent high = 19.71 on September 27; low = 12.68 on September 15
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on September 29 was a relatively small candle that looked like Dragonfly Doji just below resistance, which was acting as a support until the last week.
    • Stochastic (9,1, 3): %K is below the %D;
    • RSI-9 has declined to near 40
  • The week was down -33.01 or -0.7%; the 5-week ATR  is 107.08
  • Fourth down week in the last five weeks and seventh in the previous ten weeks;
  • The weekly pivot point=4288.40, R1=4338.16, R2=4388.28; S1=4238.28, S2=4188.52; S1 pivot level was breached
  • Below 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A small Doji candle near the close of Friday’s candle. The next support is 4238.63, which is the low of a three-day Morning Star pattern.
  • Gapped down on September 21 and broke below a symmetrical triangle – the 61.8% extension target near 4250.00 is achieved; the 100% extension target is around 4150.00. A convincing move above the gap will nullify the pattern targets.

    • Stochastic (9, 1, 3): %K crossed below the %D
    • RSI-9 is around 30; above 8-DMA;
  • Below 20-day EMA, 50-day EMA, and 100-day SMA; above 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • The downtrend since 2:00 AM on September 15. Broke below a horizontal channel on September 21 – the 100% extension target near 4305.00 is achieved, and the 161.8% extension target is around 4224.66;
  • Turned down at 8:00 AM on September 29 from a resistance level after bouncing from 4277.00, the low reached at 6:00 AM on September 27
  • The chart action since early June shows an uneven Head-and-Shoulder pattern. The neckline was broken on September 25. The 61.8% extension target is around 4210.00, the 100% extension target is near 4110.00, and the 161.8% extension target is around 3950.00. A convincing move above 4400.00 will nullify the pattern
    • RSI-21 has declined to 30 from above 60
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving down in lower lows-lower high sequence since 9:30 AM on September 29, breaking below a support level at 4300.50
    • RSI-21 has been drifting sideways to lower below 40
    • Below EMA20, which is below  EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving down since 6:45 AM.
  • The Bollinger Band has been expanding since 6:45 AM, with the price walking down the lower band.
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Monday, October 2, in mixed volume. The S&P 500 and NASDAQ composite closed higher. The Dow Jones Transportation Average and Russell 2000 traded in higher volume. Many indices broke below the lows of September 27, which were acting as short-term support.

The major indices opened lower and then traded sideways to down for most of the day before recovering a little near the close of trading. All but three S&P sectors – Consumer Discretionary, Technology, and Communication Services – closed down. The dollar index rose, and so did the US Treasury Yields. The hard commodities lost ground, and the soft commodities gained some.

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