Morning Notes – Friday October 8, 2021

/ October 8, 2021

Directional Bias For The Day:

  • S&P Futures are a little higher at 8:00 AM;
  • Price-action is a bit muted ahead of the Non-Farm Payroll report, which will impact the subsequent price move
  • The odds are for an up day with elevated volatility – watch for a break above 4401.75 and a break below 4382.25 for more clarity
  • Key economic data report due during the day:
    • Non-Farm Employment Change (194K vs. 490K vs. 366K) at 8:30 AM
    • Unemployment Rate ( 4.8% vs. 5.1% est.; prev, 5.2%) at 8:30 AM
    • Average Hourly Earnings ( 0.6% vs. 0.4% est.; prev. 0.4%) at 8:30 AM
    • Final Wholesale Inventories ( 1.2% est.; prev. 1.2%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4396.30, 4383.73, and 4365.57
  • Critical resistance levels for S&P 500 are 4413.58, 4429.97, and 4439.96
  • Key levels for E-mini futures: break above 4401.75, the high of 3:00 AM and break below 4382.25, the low of 5:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (December 2021) closed at 4391.00 and the index closed at 4399.76 – a spread of about -8.75 points; futures closed at 4390.00 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up +3.00; Dow by +19; and NASDAQ by +21.25

Markets Around The World

  • Markets in the East closed mostly higher – Seoul closed lower; Shanghai was closed for trading;
  • European markets are mixed – the UK, Spain, and Italy are up; Germany, France, Switzerland, and STOXX 600 are down
  • Currencies (Compared to two weeks ago):
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • NZD/USD
    • USD/CAD
  • Commodities (Compared to two weeks ago):
    • Energy futures are higher
    • Precious metals are mixed
    • Industrial metals mostly lower
    • Soft commodities are mostly higher
  • Treasuries (Compared to two weeks ago)
    • 10-years yield closed at 1.571%, up +16.1 basis points from two weeks ago;
    • 30-years is at 2.076%, up +20.8 basis points;
    • 2-years yield is at 0.302%, up +5.1 basis points;
    • The 10-Year-&-2-Year spread is at 1.257, up from 1.147
  • VIX
    • At 19.53 @ 6:30 AM; down from the last close; below 5-day SMA;
    • Recent high = 24.89 on October 1; low =  17.63 on September 24
    • Sentiment: Risk-On-Neutral

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

Monthly
  • September 2021 was a relatively large Bearish Engulfing with almost no upper and lower shadows; made all-time intra-month high;
    • Stochastic (9, 1, 3): %K turned below %D from near 100;
    • RSI-9 just below 70 from above 80; Bearish Divergence
    • Above the upper band of a 120-month regression channel;
  • Confirmed Uptrend: sequence of higher highs and higher lows
Weekly:
  • The week ending on October 1 was a Bearish Engulfing candle with a small upper shadow and a lower shadow that is half the size of the real body
    • Stochastic (9,1, 3): %K is below %D below 30;
    • RSI-9 is below 50
  • The week was down -98.44 or -2.2%; the 5-week ATR is 101.55
  • A down week; third in the last five weeks, and fifth in the last ten weeks
  • The weekly pivot point=4367.62, R1=4446.72, R2=4536.40; S1=4277.94, S2=4198.84; S1 pivot level was breached
  • Below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A teardrop candle that gapped up but fund resistance at EMA50; no lower shadow and an upper shadow almost twice the size of the real body;
    • Stochastic (9, 1, 3): %K is above %D; above 60
    • RSI-9 is above 45; above 8-day EMA; Bullish Divergence
  • At/below 20-day EMA and 50-day EMA; above 100-day SMA; above 200-day SMA
  • Correction
2-Hour (E-mini futures)
  • Broke above a Symmetrical triangle on October 6; the 61.8% extension target is near 4430.00 and the 100% extension target is near 4480.00
    • RSI-21 has declined from near 80 at 10:00 AM on Thursday to just below 60
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Drifting lower since 10:00 AM on Thursday; broke above a Symmetrical triangle; the 61.8% extension target near 4420.00 is achieved and the 100% extension target is near 4460.00
    • RSI-21 is moving along 50 since 3:30 PM on Thursday
    • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving sideways since 8:15 PM
  • The Bollinger Band is narrow and stable
    • Stochastic (9, 1, 3): %K is crisscrossing %D
  • Bias:  Up-Side

Previous Session

Major U.S. indices closed mostly higher on Thursday, October 7 in lower volume.  Dow Jones Transportation Average closed lower.

Major indices gapped up at the open higher and reached day’s high in the first hour of trading. They moved sideways for few hours before turning down and giving up some of the gains. The market sentiment was not as bullish by the close as it was at the open.

From Briefing.com:

The S&P 500 rose 0.8% on Thursday following an agreement among Senate leaders that would raise the debt ceiling by $480 billion and give the Treasury enough funds through Dec. 3. The Dow Jones Industrial Average (+1.0%), Nasdaq Composite (+1.1%), and Russell 2000 (+1.6%) outperformed the benchmark index.

[…]

While ten of the 11 S&P 500 sectors closed higher, the market did lose some steam ahead of tomorrow’s release of the September Employment Situation report. The S&P 500 also saw some resistance near the underside of its 50-day moving average (4439).

The consumer discretionary (+1.5%), materials (+1.4%), and health care (+1.2%) sectors finished with gains over 1.0%, while the utilities sector (-0.5%) was excluded from the advance,

[…]

The 10-yr yield rose five basis points to 1.57% — matching a recent high — while the 2-yr yield increased just one basis point to 0.31%. The U.S. Dollar Index decreased 0.1% to 94.21.

[…]

  • Initial jobless claims for the week ending October 2 decreased by 38,000 to 326,000 (Briefing.com consensus 340,000) while continuing claims for the week ending September 25 decreased by 97,000 to 2.714 million.
  • […]
  • Consumer credit increased by $14.4 bln in August (Briefing.com consensus $17.0B) after increasing an upwardly revised $17.2 bln (from $17.0 bln) in July.
  • […]
[…]
  • S&P 500 +17.1% YTD
  • Russell 2000 +13.9% YTD
  • Nasdaq Composite +13.7% YTD
  • Dow Jones Industrial Average +13.6% YTD

Overseas: 

  • Europe: DAX +1.9%, FTSE +1.2%, CAC +1.7%
  • Asia: Nikkei +0.5%, Hang Seng +3.1%, Shanghai closed for holiday

Commodities: 

  • Crude Oil +1.14 @ 78.51
  • Nat Gas +0.01 @ 5.74
  • Gold -6.00 @ 1756.60
  • Silver +0.02 @ 22.60
  • Copper +0.09 @ 4.25
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