Morning Notes – Wednesday, October 4, 2023

/ October 4, 2023

Directional Bias For The Day:

  • S&P Futures are higher at 9:00 AM – at a resistance level around 4278.00, a swing-high on the 15-minute chart
  • The odds are for an up day with elevated volatility – watch for a break below 4258.50 for a change of sentiments
  • The major economic data reports due during the day:
    • ADP Non-Farm Employment Change ( 89k vs. 154K est.; prev. 180K) at 8:15 AM
    • Final Services PMI ( 50.2 est.; prev. 50.2) at 9:45 AM
    • ISEM Services ( 53.5 est.; prev. 54.5) at 10:00 AM
    • Factory Orders ( 0.2% est.; prev. -2.1%) at 10:00 AM
  • Weekly: Uptrend Under Pressure
  • Daily: Correction
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Side-Up
  • 6-Min: Up

Key Levels:

  • Critical support levels for the S&P 500 are 4216.45, 4212.05, and 4194.92
  • Critical resistance levels for the S&P 500 are 4242.29, 4260.21, and 4277.69
  • The key levels for E-mini futures are 4282.00, the low at 8:15 AM, and 4258.50, the low at 6:45 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2023) closed at 4266.50, and the index closed at 4229.45 – a spread of about +37.00 points; the futures closed at 4264.75; the fair value is +1.75
  • Pre-NYSE session open, futures were higher – at 8:45 AM, S&P 500 futures were up by +16.75, Dow by +87, and NASDAQ by +77.50

Markets Around The World

  • Markets in the East closed lower – Shanghai was closed
  • European markets are mostly higher – the UK is lower
  • Currencies (Compared to two weeks ago):
Up Down
  • Dollar index
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • EUR/USD
  • GBP/USD
  • AUD/USD
  • NZD/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 4.739, up +37.4 basis points from two weeks ago;
    • The 30-year is at 4.865%, up +43.7 basis points
    • The 2-year yield is at 5.184%, up +7.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.445, up from -0.740
    • The 30-Year-&-10-Year spread is at 0.126, up from +0.063
  • VIX
    • At 19.78 @ 8:15 AM; unchanged from the last close; above the 5-day SMA;
    • Recent high = 21.33 on May 4; low = 15.83 on September 129
    • Sentiment: Risk-On

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 relatively large red candle with small upper and lower shadows breaking below a support level near 4238.63.
  • 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.

    • Stochastic (9, 1, 3): %K is below the %D
    • RSI-9 declined to just above 30, below 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 been bouncing up from just above 40 at 4:00 AM and after making a Bullish Divergence
    • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Moving down in lower lows-lower high sequence since 9:30 AM on September 29; bouncing up since 3:00 AM – up more than 40 points from the low of 4235.50
    • RSI-21 is around 55 from near 35
    • Above EMA10 of EMA50, which is above EMA20
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving up since 3:45 AM.
  • The Bollinger Band has been expanding since 3:45 AM, with the price walking up the upper band.
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Tuesday, October 3, in higher volume. The indices opened lower and then traded lower, though the pace of decline slowed in the afternoon. Most have broken recent support levels, and the next support levels are a few percentage points below. The NASDAQ Composite still hasn’t broken the recent support.

All but one S&P sector – Utilities – closed down. The dollar index rose, and so did the US Treasury Yields. The energy futures rose, and most of the hard and soft commodities lost ground.

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