Market Remarks

Morning Notes – Wednesday March 11, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; daily bias is down;
  • The odds are for a down day with elevated volatility; good chance of sideways to up move from pre-open levels; watch for break below 2764.25 and break above 2837.00 for clarity
  • Significant news and rumors will strongly impact the markets
  • Key economic data due:
    • CPI ( 0.1% vs. 0.0% est.; prev. 0.1%) at 8:30 AM
    • Core CPI (0.2% vs. 0.2% est.; prev. 0.2%) at 8:30 AM

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 15-Min: Side
  • 6-Min: Down

Key Levels:

  • Critical support levels for S&P 500 are 2760.25, 2734.00 and 2722.27
  • Critical resistance levels for S&P 500 are 2831.25, 2881.92 and 2901.54
  • Key levels for eMini futures: break above 2837.00, the high of 4:30 AM and break below 2764.25, the low of 8:30 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (March 2020) closed at 2881.25 and the index closed at 2882.23 – a spread of about -1.00 points; futures closed at 2865.75 for the day; the fair value is +15.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -83.00; Dow by -736 and NASDAQ by -222.00

Markets Around The World

  • Markets in the East closed mostly lower – Mumbai closed up
  • European markets are mixed – Germany, France, Switzerland and STOXX 600 are up; U.K., Spain and Italy are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Platinum
    • Cotton
    • Cocoa
    • Crude Oil
    • Silver
    • Copper
    • Palladium
    • Sugar
    • Coffee
  • Bonds
    • 10-yrs yield is at 0.724%, down from March 10 close of 0.748%;
    • 30-years is at 1.241%, up from 1.219%
    • 2-years yield is at 0.434% down from 0.542%
    • The 10-Year-&-2-Year spread is at 0.290 up from 0.206
  • VIX
    • Is at 52.17 up +4.87 from March 10 close; above 5-day SMA;
    • At highest levels since December 2008; Next high resistance is 62.12, the high of March 9; the low support is 24.93, the low on March 3

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

Monthly
  • Uptrend under pressure
  • February 2020 was a large red spinning top candle; declined 8.4%;
    • Stochastic %K is below %D and near 30; %K Bearish Divergence
    • RSI-9 declined from above 75 to 50; Bearish Divergence
    • Declined from the upper band of the 120-month regression channel to middle of the band
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then; last higher low was 2222.12 made in August 2019
Weekly:
  • The week ending on March 6 was a doji harami candle with large upper and lower shadows;
    • Stochastic (9,1, 3): %K is below %D after potential Bearish Divergence; below 20 but turning up
    • RSI (9) is nearing 30 after Bearish Divergence; turning up
  • Last week was up +18.15 or +0.6%; the 5-week ATR is 194.28
  • Last week’s pivot point=3003.54, R1=3105.55, R2=3238.72; S1=2870.37, S2=2768.36; No pivot levels were breached
  • An up week following two down weeks; third in last five weeks and fifth in last ten weeks
  • All time high of 3393.52 was during the week of February 17; Last swing low, 2822.12, was the low on August 5, 2019; previous last swing high was 3027.98, made during the week of July 22, 2019
  • Below 10-week EMA and 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A green candle, a hammer, with no upper shadow and lower shadow almost equal to the real body;
    • %K crossing above %D from near 0; Bullish Divergence
    • RSI-9 is turning up from near 25 and making a knee
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Downtrend; moving sideways with big swings since 6:00 PM on March 9;
    • RSI-21 is below 50; after making a Bullish Divergence on Monday
    • %K is crisscrossing %D lower
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Downtrend since February 19; moving sideways since 6:00 PM on Sunday within a large – 200 points range
    • RSI-21 moving between 50 and 40 since 6:00 PM on Monday
    • %K is below %D since 5:00 AM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 0:15 AM;
  • The Bollinger Band is large though it relatively narrowed from 0:15 AM to 7:00 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Side

Previous Session

Major U.S. indices closed sharply higher on Tuesday, March 10 in mostly lower volume. Dow Jones Transportation Average traded in higher volume.

The indices gapped up sharply at the open and then quickly gave up all the gains and declined to test previous day’s low by late morning. Indices then bounced up and closed near the higher of day, which was above previous day’s high though the gap down of Monday wasn’t closed.

From Briefing.com:

The stock market rebounded about 5%, while Treasuries sold off, in Tuesday’s volatile session as investors weighed the possibility of a fiscal stimulus package. The major indices started the session up nearly 4%, then briefly dipped negative as investors sold into strength, and later staged a strong rally into the close.

The S&P 500 rose 4.9%, the Dow Jones Industrial Average rose 4.9%, and the Nasdaq Composite rose 5.0%. The small-cap Russell 2000 increased just 2.9%. Sector gains ranged from 1.0% (utilities) to 6.6% (information technology).

[…]

The 2-yr yield finished 15 basis points higher at 0.47%, and the 10-yr yield finished 25 basis points higher at 0.75%. The U.S. Dollar Index rose 1.6% to 96.45.

[…]

Tuesday’s lone economic report was the NFIB Small Business Optimism Index for February, which increased to 104.5 from 104.3 in January.

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