Morning Notes – Wednesday, August 23, 2023

Directional Bias For The Day:

  • S&P Futures are higher at 8:15 AM but are declining from a high of 4425.25 at 4:00 AM – down more than 20 points
  • The odds are for a sidewyas to a down day from the pre-open levels around 4405.00, with elevated volatility – watch for a break below 4399.75 for a change of sentiments
  • The major economic data report due during the day:
    • Flash Manufacturing PMI ( 48.9 est.; prev. 49.0) at 9:45 AM
    • Flash Services PMI ( 52.1 est.; prev. 52.3) at 9:45 AM
    • New Home Sales ( 705K est.; prev. 697K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 4382.84, 4360.30, and 4354.54
  • Critical resistance levels for S&P 500 are 4400.95, 4418.59, and 4438.12
  • The key levels for E-mini futures are 4425.25, the high at 4:15 AM and 4399.75, the low at 7:45 PM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2023) closed at 4399.75, and the index closed at 4387.55 – a spread of about +12.25 points; the futures closed at 4399.25; the fair value is +0.50
  • Pre-NYSE session open, futures were higher – at 7:45 AM, S&P 500 futures were up by +6:25, Dow by +38, and NASDAQ by +15.50

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Seoul closed lower
  • European markets are mostly higher – Germany and France 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 lower
    • Precious metals are mixed
    • Industrial metals are mostly higher
    • Soft commodities are mostly lower
  • Treasuries (Compared to two weeks ago)
    • The 10-year yield closed at 4.328, up +30.2 basis points from two weeks ago;
    • The 30-year is at 4.410%, up +20.6 basis points
    • The 2-year yield is at 5.057%, up +29.9 basis points;
    • The 10-Year-&-2-Year spread is at -0.729, up from -0.732
    • The 30-Year-&-10-Year spread is at 0.082, down from +0.178
  • VIX
    • At 16.95 @ 7:45 AM; down from the last close; below the 5-day SMA;
    • Recent high = 18.88 on August 18; low = 12.73 on June 22
    • Sentiment: Risk-Off

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

Weekly:
  • The week ending on August 18 was a relatively large red Spinning Top candle.
    • Stochastic (9,1, 3): %K is below the %D;
    • RSI-9 declined to just above 50 from above 75
  • The week was down -94.34 or -2.1%; the 5-week ATR  is 102.02
  • A third consecutive down week, third in the last five weeks, and fifth in the previous ten weeks;
  • The weekly pivot point=4398.45, R1=4461.59, R2=4553.47; S1=4306.57, S2=4243.43; S1/S2 pivot levels were breached
  • Below 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A red candle with almost no upper and lower shadows that opened above the previous day’s high but closed near the mid-point of its real body; the index has declined 12 out of the past 16 trading days;

    • Stochastic (9, 1, 3): %K turned down above the %D;
    • RSI-9 is around 35; below 8-DMA
  • Below 20-day EMA and 50-day EMA; above 100-day SMA, and 200-day SMA;
  • In Correction
2-Hour (E-mini futures)
  • Bouncing up from below a previous support level of around 4410.00, almost broke the sequence of lower highs and lower lows that was in effect since July 27 by reaching up to 4440.00, but then declined more than 45 points; still below the downtrend line from July high.
    • RSI-21 has declined to around 45
    • At/below EMA20, which is at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Declining since 4:30 AM after more than 100 points from the low of 4335.00 at 9:30 AM on August 18; breaking below an uptrend line, which is also the lower bound of an Ascending Triangle, from the August 18 low
    • RSI-21 has declined to just above 40
    • Below EMA20, which is at/above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • The Bollinger Band (20, 2.0) has been moving up since 7:30 PM
  • The Bollinger Band has been expanding since 6:30 AM with the price walking down the lower band
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly lower on Tuesday, August 22, in lower volume. NASDAQ Composite closed higher.

The major indices opened up, but then started to drift lower and closed down for the day. All but three S&P sectors – Consumer Discretionary, Utilities, and Real Estate – closed down. Communication Services was unchanged.

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