Market Diary – Thursday, June 2, 2016

10:15 AM: Futures Fell Off The Bed At Open

Futures were drifting down before the 9:30 AM NYSE open. They tried to hold the fort for 15-minutes before giving up and plunging to 2086.75, near support by 9:50 AM. Since then, futures are trying to bounce but the prior broken support of 2091.25 is acting as a resistance along with a downtrend line on 6-minute chart.

The down trend-line on 14-period RSI has broken to the upside, indicating increasing momentum. Usually a break in the trend-line of RSI precedes the break in the trend-line on price. Also, the RSI made a negative divergence with price. A break above 2093.50, will increase the chance of test of Wednesday’s high of 2099.25 for S&P 500 futures.

9:15 AM: Delicately Placed – European Connection

Mario Draghi’s press conference in Brussels and the conclusion of OPEC meeting in Vienna are putting pressure on futures. Post OPEN meeting crude oil is down -1.00 and S&P 500 futures are down -9.75 points.

The futures are in the middle of a rectangle trading box. The support is at 2083.25, Wednesday’s low. If S&P 500 closed below the Wednesday low 2085.10 then it would change the tone of the market.

9:00 AM:  S&P Futures Testing Support

The S&P 500 Futures are testing the overnight lows of 2091.25, however, that may change when the NYSE open at 9:30 AM.

The Challenger Job Cuts y/y came out to -26.5%. Unemployment Claims came inline at 267K and the AD Non-Farm Employment Changes was 173K, as forecasted.

8:45 AM: Draghi Presser Moves Futures

The ECB rate decision of 7:45 AM, ADP Non-Farm Employment Change of 8:15 and Unemployment Claims did not move the future but the straw that broke the camel’s back was Mario Draghi’s press conference.

ECB raised 2016 growth forecast to 1.6% vs. its March projection of 1.4%.

During the press conference:

• S&P futures dropped to 2093.25, which is 4.75 points below Wednesday’s close, and Dow futures fell by -40
• Yields are positive
• FTSE-100, DAX and CAC-40 turned negative
• EUR/USD gained 50 pips in five-minutes.

A break by S&P 500 Futures below the support of 2091.25, the overnight lows, will be interesting. However, if past few days’ action is any indication, that support-break may not last too long. The critical piece of information still remains the U.S. Non-Farm Payroll to be released on Friday.

Directional Bias For The Day:

• Odds are good for the market to stay in a range with modest upward bias
• Watch the opening range and first hour of trading for clues
• Critical resistance level for S&P 500 – 2103.48

Before NYSE Session Open

Asian Session

The Asian bourses were mixed.

• Shanghai Composite rose in the later half to close up by +0.40%; Hang Seng had similar move and it closed up by +0.47%
• Nikkei 225 gapped down to lose -2.32% for the day after Prime Minister Shinzo Abe held back a widely-expected fiscal stimulus package; now the next support is the uptrend line forming the lower-limit of a up-sloping flag
• Australian S&P/ASX broke below a rectangle trading range after declining -0.83%;
• India’s Sensex gained +0.48 to continue its uptrend; on 60-minute it is forming a rectangle trading box; today’s candlestick formation was bullish engulfing, which nullifies Wednesday’s shooting star candlestick.

European Session

In pre-US session, European stock markets are mixed.

• DAX is almost unchanged at +0.05% though the short-term downside pressure still exits on daily timeframe; it is at the support level formed by May 25th gap-up
• STOXX-600 is up +0.22% after reversing an earlier 0.2% loss
• CAC-40 down by -0.06%; FTSE-100 is up by +0.36%; Italian FTSE MIB is up by +1.00%; Spanish IBEX-35 is up by +1.43% making a bullish engulfing day and Swiss SMI-SWX by +0.08%

Currencies

• US Dollar index is down by -0.146 to 95.31; it is still facing downward pressure; next support is between 95.075 to 94.925
• USD/JPY is down by -504 pips to 108.956 (means Yen is stronger against USD); it has broken below the lower bound of an up-sloping bearish flag; it is acting more as a risk-off trade than anything else
• EUR/USD is up and is at the upper limit of a down-sloping flag; British Pound is also marginally up
• Aussie and Kiwi dollars are down slightly
• The MSCI Emerging Markets Currency Index added 0.1 percent as the ruble advanced 0.3 percent, buoyed by oil’s gains

Commodities

• WTI Crude is down by -0.10 to 48.91; it broke below a symmetrical triangle; on Wednesday, it touched 47.75 near the support level of 47.64 to 46.73 range
• Natural Gas is slightly down after breaking above a resistance of 2.315 on Wednesday; next resistance is January 8th high of 2.480.
• Gold and Silver are up marginally; they are forming a down-sloping flag; they were up at this time on Wednesday but closed the in red
• Copper is down by 0.095 to 2.0635; it is trying to test the recent low of 2.038, reached on May 19th.

Yields

• Japan’s 10-year sovereign debt drew the strongest demand in almost two year; it has negative yields
• U.S. 30-years yields are down by -0.002% after falling on Wednesday; U.S. 10-year yields are up by +0.012% following a down day; both are forming triangles on daily timeframe

Yesterday:

Though on Wednesday, major indices did not gain much, the day’s action was much more positive as market rose after making lows at NYSE session open..

Pivot Levels:

S&P 500 is above 10-D EMA; 10-EMA is above 20-D EMA; 20-D EMA is trending above 50-D EMA since March 9, 2016.

	S&P 500 Cash		eMini Futures
Daily	Level	Break Chance	Level	Break Chance
Pivot	2095.13		2093.50
R1	2105.17	61%	2103.75	56%
R2	2111.00	42%	2109.50	31%
R1	2121.04	44%	2119.75	22%
S1	2089.30	36%	2087.75	35%
S2	2079.26	35%	2077.50	27%
S3	2073.43	24%	2071.75	23%

Note: The probability of a level breaking is shown above is for the current condition when 1) the price is above 10-D EMA; 2) 10-D EMA is above 20-D EMA; and 3) 20-D EMA is above 50-D EMA. R2 break probability comes in picture only when R1 is broken. So are the probabilities calculated for R3, S2 and S3