Morning Notes – Thursday, October 5, 2023

/ October 5, 2023

Directional Bias For The Day:

  • S&P Futures are lower at 9:00 AM – declined more than 20 points from 8:00 AM, moving between a horizontal channel between 4304.00 and 4277.25
  • The odds are for a sidewyas to down day with elevated volatility – watch for a break above 4304.00 or a break below 4277.25 for clarity
  • The major economic data reports due during the day:
    • Unemployment Claims ( 207k vs. 211K est.; prev. 205K) at 8:30 AM
    • Trade Balance ( -58.3B vs. -60.5B est.; prev. 64.7B) at 8:30 AM
  • Weekly: Uptrend Under Pressure
  • Daily: Correction
  • 120-Min: Down-Side
  • 30-Min: Up-Side
  • 15-Min: Side
  • 6-Min: Side-Down

Key Levels:

  • Critical support levels for the S&P 500 are 4231.85, 4220.83, and 4216.45
  • Critical resistance levels for the S&P 500 are 4268.50, 4277.69, and 4288.26
  • The key levels for E-mini futures are 4298.00, the high at 8:00 AM, and 4277.25, the low at 5:30 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2023) closed at 4296.25, and the index closed at 4263.75 – a spread of about +32.75 points; the futures closed at 4297.75; the fair value is -1.50
  • Pre-NYSE session open, futures were lower – at 8:45 AM, S&P 500 futures were down by -16.75, Dow by -110, and NASDAQ by -55.75

Markets Around The World

  • Markets in the East closed mostly higher – Seoul was down; Shanghai was closed
  • European markets are 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 4.767, up +41.8 basis points from two weeks ago;
    • The 30-year is at 4.918%, up +51.7 basis points
    • The 2-year yield is at 5.071%, down -12.0 basis points;
    • The 10-Year-&-2-Year spread is at -0.304, up from -0.842
    • The 30-Year-&-10-Year spread is at 0.151, up from +0.052
  • VIX
    • At 18.70 @ 8:45 AM; up from the last close; above the 5-day SMA;
    • Recent high = 20.88 on October 4; low = 15.83 on September 129
    • 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 Piercing candle that bounced off an uptrend line since October 13, 2022, and from the lows of June 1, 2023.
  • 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 crossed above the %D; Bullish Divergence
    • RSI-9 bounced up to above 30 from around 20, 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 bounced up above 50 from below 30 and after making a Bullish Divergence
    • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sidewyas since 3:00 PM on Wednesday between 4304.00 and 4277.25
    • RSI-21 is moving around 50
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving sidewyas to down since 3:30 PM.
  • The Bollinger Band has been expanding a bit – the price has declined to the lower band from the upper band.
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Wednesday, October 4, in mostly lower volume. Dow Jones Transportation Average traded in higher volume.

The indices opened higher and, after some initial swings, traded higher for most of the day. Most are either at support levels or briefly breached those levels. Wednesday, most indices tried to bounce off the support levels.

All but two S&P sectors – Utilities and Energy – closed up. The dollar index declined, and so did the US Treasury Yields. The energy futures were mixed, and most of the hard and soft commodities lost ground.

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