Market Remarks

Morning Notes – Monday February 24, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are sharply lower;
  • The odds are for a down day with elevated volatility;
    • good chance of a bounce at the open from pre-open lows
    • News from China/South Korea is affecting the sentiments
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3235.66, 3214.68 and 3205.38
  • Critical resistance levels for S&P 500 are 3256.33, 3259.30 and 3280.61
  • Key levels for eMini futures: break above 3265.75, the high of 7:00 AM and break below 3232.75, the low of 4:00 AM on February 3

Pre-Open

  • On Friday, at 4:00 PM, S&P future (March 2020) closed at 3337.00 and the index closed at 3337.75 – a spread of about -0.75 points; futures closed at 3339.25 for the day; the fair value is -2.25
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -93.75; Dow by -838 and NASDAQ by -292.75

Markets Around The World

  • Markets in the East closed lower – Tokyo was closed for trading;
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Crude Oil
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 1.376%, down from February 21 close of 1.471%;
    • 30-years is at 1.823%, down from 1.918%
    • 2-years yield is at 1.260%, down from 1.350%
    • The 10-Year-&-2-Year spread is at 0.116 down from 0.121
  • VIX
    • Is at 22.45 up +5.37 from February 21 close; above 5-day SMA; gapped up at the week’s open
    • Next high resistance is 24.81, the high of August 5, 2019; the low support is the lower high of the gap at 18.88, the high of February 3

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

Monthly
  • Uptrend
  • January 2020 was a red shooting star like candle with long upper shadow and almost no lower shadow
    • Stochastic %K turned below %D from above 90
    • RSI-9 is above a downtrend line from January 2018 high; turning down just above 70
    • At the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then
Weekly:
  • The week ending on February 21 was a red harami candle with small lower shadow and upper shadow almost equal to the real body,. which was half the size of previous week’s real body
    • Stochastic (9,1, 3): %K crossed below %D; potential Bearish Divergence
    • RSI (9) has turned down from near 75; potential Bearish Divergence
  • Last week was down -42.41 or -1.3%; the 5-week ATR is 78.37
  • Last week’s pivot point=3353.24, R1=3378.03, R2=3418.31; S1=3312.96, S2=3288.17; S1 pivot levels was breached
  • A down week following two up weeks; third in last five weeks and fourth in last ten weeks
  • Near all time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • Above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
Daily
  • A relatively large red candle that opened below the previous close and never tested it; almost the whole real body was within the lower shadow or Thursday; no upper shadow and small lower shadow;
    • %K is below %D; below 30; Bearish Divergence
    • RSI-9 has turned below 50; below 8-day SMA;
  • At/above 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving down after down gap open for the week on Sunday evening; nearing the support level made by the lows of late January early February
    • RSI-21 is trending down since 6:00 PM on Fabruary 19 from above 70 to below 20
    • %K is crisscrossing %D lower
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Sharp waterfall down since 7:00 PM on February 19
    • RSI-21 is trending down from near 65 to near 20
    • %K crisscrossing %D around or below 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving down since 10:45 AM on February 20; sharp down leg since 2:15 AM
  • The Bollinger Band was narrow from 11:00 PM to 2:15 AM; expanding since with price mostly walking down the lower band
  • Stochastic (9, 1, 3): %K is below %D since 7:00 AM; potential for Bullish Divergence at the open
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Friday, February 21 in mostly higher volume. Indices opened down and then for most of the day traded down. Some indices closed up from the day’s lows others close near the lows. Russell 2000 traded in lower volume. All but three S&P sectors – Consumer Staples, Healthcare and Real Estate – closed down for the day.

For the week, most major U.S. indices closed lower in mixed volume. Dow Jones Transportation Average closed up. S&P 500 and NASDAW Composite traded in higher volume. European bourses closed lower for the week. Most Asian exchanges also closed down – Shanghai and Sydney closed up for the week. Only two S&P sectors – Real Estate and Telecom – closed up for the week.

From Briefing.com:

U.S. stocks sold off to end the week, while investors continued to buy less risky assets, amid pestering concerns about the coronavirus and valuation. The Nasdaq Composite led the retreat with a 1.8% decline, followed by the S&P 500 (-1.1%), Russell 2000 (-1.0%), and Dow Jones Industrial Average (-0.8%).

[…]

The top-weighted S&P 500 information technology sector (-2.3%) was today’s outright laggard amid broad-based selling. The gains in the real estate (+0.4%) and consumer staples (+0.3%) sectors reflected the market’s defensive posture and helped limit the broader decline.

[…]

U.S. Treasuries, as previously stated, continued to post gains. The 2-yr yield declined four basis points to 1.35%, and the 10-yr yield declined five basis points to 1.47%. The U.S. Dollar Index fell 0.5% to 99.32. WTI crude declined 0.7%, or $0.40, to $53.34/bbl.

[…]

• Existing home sales decreased 1.3% m/m in January to a seasonally adjusted annual rate of 5.46 million units (Briefing.com consensus 5.42 million) from a downwardly revised 5.53 million (from 5.54 million) in December. Total sales were up 9.6% year-over-year.
o The key takeaway from the report is that the housing inventory for January was at its lowest level since 1999, demonstrating that there are serious inventory constraints in the existing home sales market, which is driving up prices and underscoring the importance of mortgage rates staying low for affordability purposes.

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