Market Remarks

Morning Notes – Thursday February 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; resuming the downtrend since 4:30 AM
  • The odds are for a down day with elevated volatility; watch for break above 3104.00 for change of fortune
  • Key economic data due:
    • Core Durable Goods Orders ( 0.9% vs. 0.2% est.; prev. 0.1%) at 8:30 AM
    • Durable Goods Orders ( -0.2% vs. -1.5% est.; prev. 2.9%) at 8:30 AM
    • Prelim GDP ( 2.1% vs. 2.1% est.; prev. 2.1% ) at 8:30 AM
    • Prelim GDP Price Index (1.3% vs. 1,4% est.; prev. 1.4%) at 8:30 AM
    • Unemployment Claims (219K vs. 211K est.; prev. 211K) at 8:30 AM
    • Pending Home Sales (est. 2.9% vs.; -4.9% ) at 10:00 AM

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 3070.33, 3060.53 and 3050.72
  • Critical resistance levels for S&P 500 are 3078.80, 3087.41 and 3094.97
  • Key levels for eMini futures: break above 3084.50, the high of 7:00 AM and break below 3059.50, the low of 0:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (March 2020) closed at 3116.25 and the index closed at 3116.39 – a spread of about -0.25 points; futures closed at 3110.25 for the day; the fair value is +6.00
  • Pre-NYSE session open, futures are lower – at 8:15 AM, S&P 500 futures were down by -45.00; Dow by -423 and NASDAQ by -16.50

Markets Around The World

  • Markets in the East closed mostly lower; Shanghai and Hong Kong closed up
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield closed at 1.310%, down from February 25 close of 1.330%;
    • 30-years is at 1.796%, down from 1.804%
    • 2-years yield is at 1.172%, down from 1.186%
    • The 10-Year-&-2-Year spread is at 0.138 down from 0.144
  • VIX
    • Is at 30.11 up +2.55 from February 25 close; above 5-day SMA;
    • AT highest level since December 2018; Next high resistance is 30.25, the high of February 25; 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 red candle with large upper shadow and small lower shadows; next support is at 3070.33, the low of December 3
    • %K is below %D; below 10 following Bearish Divergence few days ago
    • RSI-9 has moved below 20; below 8-day SMA;
  • Below 20-day EMA, 50-day EMA and 100-day SMA; above 200-day SMA;
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving sideways – with sharp changes in direction – since 8:00 PM; down bias; near a support level around 3069.00, the low of December 3
    • RSI-21 is moving around 30
    • %K is crisscrossing %D below 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving sideways since 8:00 PM within a 50-point range;
    • RSI-21 is moving between 30 and 40
    • %K is below %D since 5:00 AM; crossing above it at 8:00 AM
  • 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 sideways to down since 1:45 AM;
  • The Bollinger Band is expanding with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Wednesday, February 26 in volume lower than that on Tuesday. NASDAQ Composite eked out a gain. Indices open up higher from previous day and rose nearly 1.5% but then turned back down in late morning. For rest of the day they traded down and closed near the lows of the day. The futures continued the slide till midnight.

From Briefing.com:

The S&P 500 advanced as much as 1.7% on Wednesday, as investors tried to buy an oversold market, but pestering worries about the coronavirus left the benchmark index down 0.4% for the session. The Nasdaq Composite (+0.2%) eked out a slim gain, while the Dow Jones Industrial Average (-0.5%) and Russell 2000 (-1.2%) joined the S&P 500 in negative territory.

[…]

All 11 S&P 500 sectors had traded in the green, but only the information technology sector (+0.4%) was able to finish in positive territory thanks to strength in Apple (AAPL 292.65, +4.57, +1.6%) and Microsoft (MSFT 170.17, +2.10, +1.3%). The energy sector dropped 3.0% amid continued weakness in oil prices ($48.70, -1.19, -2.4%).

[…]

U.S. Treasuries were less in focus today, but the continued gains in the bond market weren’t conducive for risk sentiment. The 2-yr yield declined five basis points to 1.15%, and the 10-yr yield declined two basis points to 1.31%. The U.S. Dollar Index increased 0.2% to 99.13.

[…]

• New home sales increased 7.9% m/m in January to a seasonally adjusted annual rate of 764,000 units (Briefing.com consensus 720,000) from an upwardly revised 708,000 (from 694,000) in December.
o The key takeaway from the report is that new home sales were also strong on a year-over-year basis (+18.6%), benefiting from the drop in mortgage rates and the extremely tight supply of existing homes for sale.
• The weekly MBA Mortgage Applications Index increased 1.5% following a 6.4% decline in the prior week.

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