Morning Notes – Thursday, June 16, 2022

Directional Bias For The Day:

  • S&P Futures are lower at 8:45 AM; moving up  since 5:15 AM – from 3695.00 to around 3720.00
  • The odds are for a down day with elevated volatility – watch for a break above 3732.50
  • The key economic data report due during the day:
    • Unemployment Claims ( 229K vs 215K est.; prev. 232K ) at 8:30 AM
    • Philly Fed Index ( -3.3 vs. 5.1 est.; prev. 2.6) at 8:30 AM
    • Building Permits ( 1.70M vs. 1.78M est.; prev. 1.82M) at 8:30 AM
    • Housing Starts ( 1.55M vs. 1.70 M est.; prev. 1.81M) at10:00 AM

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Side-Down
  • 30-Min: Down-Side
  • 15-Min: Side-Down
  • 6-Min: Down-Side

Key Levels:

  • Critical support levels for S&P 500 are 3722.30, 3705.68, and 3694.12
  • Critical resistance levels for S&P 500 are 3773.24, 3804.00, and 3837.56
  • Key levels for E-mini futures: break above 3732.50, the high at 4:00 AM and a break below 3695.00, the low at 5:15 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2022) closed at 3795.50 and the index closed at 3789.99 – a spread of about +5.50 points; futures closed at 3793.50 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -61.00; Dow by -432; and NASDAQ by -209.25

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo and Seoul closed higher
  • European markets are lower
  • 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 3.397%, up +15.9 basis points from two weeks ago;
    • The 30-year is at 3.425%, up +34.9 basis points;
    • The 2-year yield is at 3.222%, up +56.0 basis points;
    • The 10-Year-&-2-Year spread is at 0.175, up from 0.269
    • The 30-Year-&-10-Year spread is at 0.028, up from 0.145
  • VIX
    • At 31.1 @ 8:00 AM; up from the last close; above the 5-day SMA;
    • Recent high = 35.05 on June 13; low = 24.94 on May 4
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on June 10 was a large Bearish Engulfing candle near the 38.2% Fibonacci retracement level of the previous rally from March 2020
    • Stochastic (9,1, 3): %K is below %D
    • RSI-9 is just above 30
  • The week was down -207.68 or -5.1%; the 5-week ATR  is 240.10
  • A down week; fourth in the least five weeks and nine in the previous ten weeks
  • The weekly pivot point=3989.93, R1=4079.71, R2=4258.55; S1=3811.09, S2=3721.31; R1/S1/S2/S3 pivot levels were breached
  • Below 10-week EMA and 39-week SMA; at/below 89-week SMA
  • In Correction
Daily
  • A green spinning top candle near the open of Tuesday’s red spinning top; bounced off from between two swing lows – March 4, 2021  (3723.34) and January 29, 2021 (3694.12) 
    • Stochastic (9, 1, 3): %K is above %D; below 20
    • RSI-9 is just above 30; below 8-day EMA; potential Bullish Divergence
  • Below 20-day EMA; below 50-day EMA, 200-day SMA, and 100-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Declining since 8:00 PM on Wednesday from a resistance level formed by the lower bound of a Horizontal Channel and the May 20 low of 3807.50 
    • RSI-21 has declined to near 35 from above 70
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (E-mini futures)
  • Moving sideways near the lows after declining from above 3800.00 to 3720.00;
    • RSI-21 is drifting since 6:00 AM
    • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) is moving down since 3:45 PM
  • The Bollinger Band is contracting a bit since 8:00 AM
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Wednesday, June 15, in higher volume. The major indices opened higher and then mostly traded sideways until the FOMC statement at 2:00 PM. Then after a volatile move, they moved higher before giving up some of the gains in the final half-hour of trading. Most indices made indecisive spinning top candles near the open of the previous day’s red candles. A break above will complete Morning Star patterns but a move down will resume the downtrend.

From Briefing.com:

[…]

The accompanying summary of economic projections revealed upward revisions to the median estimate for PCE inflation (to 5.2% from 4.3%) and core CPE inflation (to 4.3% from 4.1%) this year, a downward revision to the change in real GDP (to 1.7% from 2.8%), a higher unemployment rate (to 3.7% from 3.5%), and, most importantly, a sharp upward revision to the median estimate for the fed funds rate (to 3.4% from 1.9%).

[…]

the 2-yr note yield was at 3.23%, down 20 basis points from where it settled on Tuesday, whereas the 10-yr note yield was at 3.32%, down 16 basis points from where it settled on Tuesday.

[…]

Advancers led decliners by a nearly 3-to-1 margin at the NYSE and the Nasdaq; 21 of 30 Dow components ended with a gain; and ten out of 11 S&P 500 sectors closed higher. The lone sector holdout was the energy sector (-2.1%), which got clipped by lower oil prices ($115.25, -3.68, -3.1%)

[…]

The Vanguard Mega-Cap Growth ETF (MGK) gained 2.6% versus a 1.0% gain for the Invesco S&P 500 Equal Weight ETF (RSP).

[…]
  • The MBA Mortgage Applications Index increased 6.6% week-over-week, with purchase applications up 8% and refinancing applications up 4%
  • Total retail sales decreased 0.3% month-over-month (Briefing.com consensus +0.2%) following a downwardly revised 0.7% increase (from 0.9%) in April. Excluding autos, retail sales increased 0.5% (Briefing.com consensus +0.7%) following a downwardly revised 0.4% increase (from 0.6%) in April.
  • […]
  • The New York Fed’s Empire State Manufacturing Survey for June was weaker than expected at -1.3 (Briefing.com consensus 3.0), but it was improved from the -11.6 reading in April. Nonetheless, a number below 0.0 is still indicative of a contraction in manufacturing activity.
  • The Import-Export Price Index for May showed a 0.3% decline in nonfuel imports and a 2.9% increase in non-agricultural exports. That left the year-over-year changes at 5.9% and 19.3%, respectively.
  • Business Inventories increased 1.2% month-over-month in April, as expected, following an upwardly revised 2.4% increase (from 2.0%) in March.
  • The June NAHB Housing Market Index dipped to 67 (Briefing.com consensus 68) from 69 in May.
[…]
  • Dow Jones Industrial Average: -15.4% YTD
  • S&P 400: -18.7% YTD
  • S&P 500: -20.5% YTD
  • Russell 2000: -22.9% YTD
  • Nasdaq Composite: -29.1% YTD

Overseas: 

  • Europe: DAX +1.4%, FTSE +1.2%, CAC +1.4%
  • Asia: Nikkei +1.1%, Hang Seng +0.5%, Shanghai +1.1%

Commodities: 

  • Crude Oil -3.68 @ 115.25
  • Nat Gas +0.24 @ 7.43
  • Gold +6.80 @ 1819.80
  • Silver +0.49 @ 21.42
  • Copper +0.02 @ 4.15 
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