Morning Notes – Tuesday February 25, 2020

/ February 25, 2020

Directional Bias For The Day:

  • S&P Futures are higher; bouncing off oversold levels
  • The odds are for an up to sideways day with elevated volatility; watch for break below 3220.25 for change of fortune
  • Key economic data due:
    • HPI ( 0.6% vs. 0.4% est.; prev. 0.2% ) at 9:00 AM
    • S&P/CS Composite-20 HPI ( 2.85% vs. 2.8% est.; prev. 2.6%) at 9:00 AM
    • CB Consumer Confidence ( est. 132.6 ; prev. 131.6) at 10:00 AM
    • Richmond Fed Manufacturing Index ( est. 10; prev. 10) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 225.82, 3214.65 and 3205.38
  • Critical resistance levels for S&P 500 are 3253.58, 3259.81 and 3280.61
  • Key levels for eMini futures: break above 3259.50, the high of 8:30 PM and break below 3220.25, the low of 5:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (March 2020) closed at 3225.50 and the index closed at 3225.89 – a spread of about -0.50 points; futures closed at 3226.25 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +12.75; Dow by +133 and NASDAQ by +67.75

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Sydney and Mumbai closed lower; Hong Kong, Seoul and Singapore closed higher;
  • European markets are lower
  • Currencies:
    Up Down
    • GBP/USD
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Palladium
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.366%, down from February 21 close of 1.471%;
    • 30-years is at 1.831%, down from 1.918%
    • 2-years yield is at 1.252%, down from 1.350%
    • The 10-Year-&-2-Year spread is at 0.114 down from 0.121
  • VIX
    • Is at 23.19 down -1.84 from February 24 close; above 5-day SMA;
    • Next high resistance is 26.35, the high of February 24; 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 gapped down at the open; almost no upper shadow and very small lower shadow; near the support created by the lows of January 31 and December 31
    • %K is below %D; below 10; Bearish Divergence
    • RSI-9 has turned below 30; below 8-day SMA;
  • Below 20-day EMA and 50-day EMA; above 100-day SMA and 200-day SMA;
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving sideways – with sharp changes in direction – since 4:00 AM on Monday after the gap down open for the week on Sunday evening; near a support level made by the lows of late January early February
    • RSI-21 bounced up from near 10 to just below 40
    • %K is crisscrossing %D lower
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways since 4:00 AM on Monday between 3266.00 and 3215.00;
    • RSI-21 is moving up from below 20 and after making Bullish Divergence at 1:00 PM on Monday; near 40
    • %K is above %D since 5:00 AM
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 8:45 AM on February 24;
  • The Bollinger Band narrowed from 11:30 PM to 3:15 AM; expanding since with price first walking down the lower band till 5:45 AM and then moving up to the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D near 80
  • Bias: Side

Previous Session

Major U.S. indices closed lower on Monday, February 24 in higher volume. Indices gapped down at the open and then traded down closing near day’s lows. Most are at support created by the lows of January and February.

From Briefing.com:

The stock market sold off more than 3% on Monday following a surge in coronavirus cases outside China, including South Korea, Italy, and Iran. The Dow Jones Industrial Average (-3.6%), S&P 500 (-3.4%), and Russell 2000 (-3.0%) each turned negative for the year, while the Nasdaq Composite (-3.7%) gave up most of its monthly gains.

[…]

South Korea’s Kospi fell 3.9%, and Italy’s MIB fell 5.4%. China’s Shanghai Composite declined just 0.3% amid reports that the rate of new coronavirus cases may have peaked in the region.

[…]

In turn, de-risking efforts were widespread with all 11 S&P 500 sectors finishing in negative territory, including seven that dropped at least 3.0%. The energy (-4.7%), information technology (-4.2%), and consumer discretionary (-3.5%) sectors led the retreat, while the utilities sector (-1.2%) declined the least.

[…]

Away from equities, investors continued to seek safety in gold ($1676.70/ozt, +27.80, +1.7%) and U.S. Treasuries given the growth concerns and weakness in stocks. Hedging interest against further downside was also on full display by the 46.6% surge in the CBOE Volatility Index (25.03, +7.95).

The 2-yr yield and the 10-yr yield fell nine basis points each to 1.26% and 1.38%, respectively. The U.S. Dollar Index finished flat at 99.30. WTI crude dropped 3.9%, or $2.09, to $51.25/bbl.

[…]

Investors did not receive any economic data on Monday.

[…]
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