Morning Notes – Monday March 2, 2020

Directional Bias For The Day:

• S&P Futures are higher but the daily bias is down;
• The odds are for an up day with elevated volatility; watch for break above 2908.25 for change of fortune
• Key economic data due:
  • Final Manufacturing PMI (50.7 vs. 50.8 est.; prev. 50.8) at 9:45 AM
  • ISM Manufacturing PMI ( 50.1 vs. 50.5 est. ; prev. 50.9) at 10:00 AM
  • Construction Spending ( 1.8% vs. 0.6% est.; prev. 0.2% ) at 10:00 AM
  • ISM Manufacturing Prices  (45.9 vs. 51.2 est.; prev. 3.3) at 10:00 AM

Directional Bias Before Open:

Key Levels:

• Critical support levels for S&P 500 are 2900.00, 2881.00 and 2855.84
• Critical resistance levels for S&P 500 are 2978.19, 3026.46 and 3052.07
• Key levels for eMini futures: break above 2995.00, the high of 3:30 AM and break below 2908.75, the low of 6:30 AM

Pre-Open

• On Friday, at 4:00 PM, S&P future (March 2020) closed at 2963.75 and the index closed at 2954.22 – a spread of about -9.50 points; futures closed at 2951.00 for the day; the fair value is +12.75
• Pre-NYSE session open, futures are higher – at 9:15 AM, S&P 500 futures were up by +19.50; Dow by +206 and NASDAQ by +76.51

Markets Around The World

• Markets in the East closed mixed – Shanghai, Hong Kong, Tokyo and Seoul closed up; Sydney, Mumbai and Singapore closed down
• European markets are mostly lower – the U.K. is up
• Currencies:
  

  Up	Down
  EUR/USD AUD/USD NZD/USD INR/USD	Dollar index GBP/USD USD/JPY USD/CHF USD/CAD

• Commodities:
  

  Up	Down
  Crude Oil NatGas Gold Silver Copper Coffee Cotton	Platinum Palladium Sugar Cocoa

• Bonds
  • 10-yrs yield is at 1.069%, down from February 28 close of 1.127%;
  • 30-years is at 1.623%, down from 1.671%
  • 2-years yield is at 0.780% down from 0.926%
  • The 10-Year-&-2-Year spread is at 0.289 up from 0.201
• VIX
  • Is at 41.07 up +0.96 from February 28 close; above 5-day SMA;
  • At highest levels since February 2018; Next high resistance is 49.48, the high of February 28; the low support is the upper high of the gap at 22.00, the low on February 24

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

Previous Session

Major U.S. indices closed mostly lower on Friday, February 28 in volume higher than that on Thursday. NASDAQ Composite was up or unchanged. Indices gapped down at the open and made day’s lows in the first hour of trading near the support level created by the October 2019 lows. Indices then rose and made days highs, recovering only part of the losses, in early afternoon. They gave up some of those gains by closing and closed much above the lows but still with significant losses for the day. Indices bounced up a lot in the last few minutes of trading for the day.

For the week, U.S. indices declined more than 10% after opening for the week with gap down. The declines in Asia and European markets were comparable if not more. All S&P sectors were down for the week. US Dollar declined for the week. Most commodities – except coffee – declined for the week. Treasuries advanced significantly.

From Briefing.com:

The stock market put up a bit of a fight on Friday, but when the dust settled, it was still the worst week for equities since late 2008, as the S&P 500 (-0.8%) surrendered 11.5% since last Friday.

The intraday rebound was fueled by relative strength in semiconductor stocks, but that strength was fleeting. The PHLX Semiconductor Index started the day with a 3.8% loss, flashed a 2.9% gain in late morning trade, returned to its flat line in the afternoon, but rallied during the final minutes of trade to end higher by 2.2%. The final push helped the Nasdaq inch into positive territory by the close.

[…]

The 10-yr yield fell another 17 basis points to a fresh record low of 1.13% while the 30-yr yield slid 11 basis points to 1.67%. Up front, the 2-yr yield fell 22 basis points to 0.88%.

[…]

• Personal income in January was up a stronger than expected 0.6% (Briefing.com consensus 0.4%), personal spending was up a weaker than expected 0.2% (Briefing.com consensus 0.3%), the PCE Price Index and core PCE Price Index, which excludes food and energy, were both up 0.1% when each was expected to be up 0.2%. On a yr/yr basis, the PCE Price Index was up 1.7%, versus 1.5% in December, and the core PCE Price Index was up 1.6%, versus 1.5% in December.
o The key takeaway from the report is that it continues to show subdued inflation pressure, which might mean something for the Fed if it is worried about demand destruction in coming months, like the capital markets seem to be, due to the coronavirus.
• The University of Michigan Index of Consumer Sentiment for February was revised to 101.0 (Briefing.com consensus 100.8) from the preliminary reading of 100.9. The final reading was close to matching the 101.4 expansion peak seen in March 2018.
o The key takeaway from the report is that the coronavirus issue had still not permeated the consumer’s mindset, although mentions of the virus were picking up as the month was drawing to a close and reporting on the issue was increasing.
• The Chicago PMI increased to 49.0 in February from 42.9 in January.
• The advance goods trade deficit totaled $65.50 bln in January after a $68.7 bln deficit in December.
• Advance retail inventories increased 0.3%% in January after increasing 0.1% in December.
• Advance wholesale inventories decreased 0.2% in January after decreasing 0.3% in December.