Market Remarks

Morning Notes – Friday March 13, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are sharply higher; bouncing since 11:15 PM from oversold conditions
  • The odds are for an up day with elevated volatility;
  • Vulnerable to news and events
  • Key economic data due:
    • Import Prices ( -0.5% vs. -1.0% est.; prev. 0.1%) at 7:30 AM
    • Prelim UoM Consumer Sentiment (est. 95.0; prev. 101.0) at 10:00 AM
    • Prelim UoM Inflation Expectations (prev. 2.4%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2554.502520.80 and 2478.86
  • Critical resistance levels for S&P 500 are 2630.86, 2660.95 and 2707.22
  • Key levels for eMini futures: break above 2658.75, the high of 1:00 PM on Thursday and break below 2523.00, th elow of 5:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (March 2020) closed at 2469.75 and the index closed at 2480.64 – a spread of about -11.00 points; futures closed at 2469.00 for the day; the fair value is +0.75
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +126.00; Dow by +1110 and NASDAQ by +407.00

Markets Around The World

  • Markets in the East closed mostly lower – Sydney and Mumbai are up
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Gold
    • Silver
    • Palladium
    • Cocoa
  • Bonds
    • 10-yrs yield is at 0.938%, up from March 12 close of 0.849%;
    • 30-years is at 1.549%, up from 1.407%
    • 2-years yield is at 0.542% up from 0.473%
    • The 10-Year-&-2-Year spread is at 0.396 up from 0.376
  • VIX
    • Is at 65.07 down -10.40 from March 12 close; above 5-day SMA;
    • At highest levels since March 2008; Next high resistance is 81.48, the high of March 2008; the low support is 55.82, the low of the gap on March 12

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 large red candle that gapped down with small upper shadow and almost no lower shadow;
    • broken below recent and June 2019 support levels,
    • double top break-down on intraday charts; 161.8% extension target near 2475.69 is achieved
    • Next support is at 2346.50, the 61.8% Fibonacci retracement of the rally from February 2016 to February 2020, which is also the low of 2018
    • %K is below %D; below 20
    • RSI-9 is turning down from just above 30; below 8-day RSI, which is turning up
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Downtrend – lower highs and lower lows; bouncing up since 10:00 PM on Thursday;
    • RSI-21 rising from near 15 to above 50
    • %K is above %D
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Downtrend since February 19; bouncing since 11:00 PM on Thursday
    • RSI-21 rising from near 25 yo near 50
    • %K is above %D above 90
  • Above, 20-bar EMA, but below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 0:30 AM;
  • The Bollinger Band is large though it is relatively narrow
  • Stochastic (9, 1, 3): %K is above %D
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Thursday, March 12 in higher volume. Indices gapped down at the open and then mostly traded down for the day closing near the lows. Market had the worst day since October 1987.

From Briefing.com:

Each of major indices dropped more than 9% on Thursday, as new stimulus measures from central banks failed to stir confidence among investors without a meaningful fiscal response from Washington. The Russell 2000 (-11.2%) led the retreat, followed by the Dow Jones Industrial Average (-10.0%), S&P 500 (-9.5%), and Nasdaq Composite (-9.4%) with each closing down more than 25% from prior highs.

For the second time this week, the S&P 500 triggered a 15-minute trading halt after falling by 7.0% shortly after the open following more economic disruptions caused by the coronavirus.

[…]

Few asset classes were safe today. The S&P 500 sectors lost between 7.4% (health care) and 12.3% (energy). WTI crude fell 4.3%, or $1.43, to $31.57/bbl. Gold futures fell 3.2% to $1589.80/ozt. The 2-yr yield was unchanged at 0.49%, and the 10-yr yield increased three basis points to 0.85% amid selling pressure. The U.S. Dollar Index rose 0.8% to 97.25.

[…]

The market wants strong and immediate action, as well as signs that the coronavirus situation will get better. The CBOE Volatility Index, which is commonly referenced as a fear gauge, surged 40.0% to 75.47– its highest level since the financial crisis — as investors rushed for more protection against further equity weakness.

[…]

• The Producer Price Index for February declined 0.6% m/m (Briefing.com consensus -0.2%) while core PPI, which excludes food and energy, declined 0.3% (Briefing.com consensus 0.1%). That left the yr/yr readings at 1.3% and 1.4%, respectively.
o The key takeaway from the report is that it was weighed down sharply by the decline in energy prices, which was prominent in final demand goods, processed goods for intermediate demand, and unprocessed goods for intermediate demand.
• Initial jobless claims decreased by 4,000 for the week ending March 7 to 211,000 (Briefing.com consensus 218,000). Continuing claims for the week ending February 29 decreased by 11,000 to 1.722 million.
o The key takeaway from the report is that the good news in it will be overlooked, as subsequent developments suggest there will be a tide of rising initial claims in coming weeks.

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