Market Remarks

Morning Notes – Monday March 16, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are limit down since 6:00 PM on Sunday
  • The odds are for a down day with elevated volatility;
  • Key economic data due:
    • Empire State Manufacturing Index ( -21.5% vs. 5.1% est.; prev. 12.9%) at 9:30 AM
    • TLC Long-Term Purchases (est. 72.5B; prev. 85.6B) at 4:00 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2478.86, 2443/96 and 2397.94
  • Critical resistance levels for S&P 500 are 2492.37, 2531.73 and 2710.89
  • Key levels for eMini futures: break above 2380.00, the low of 10:00 PM on March 12

Pre-Open

  • On Friday, at 4:00 PM, S&P future (March 2020) closed at 2703.75 and the index closed at 2711.02 – a spread of about -7.25 points; futures closed at 2684.00 for the day; the fair value is +19.75
  • Pre-NYSE session open, futures are limit down since 6:00 PM on Sunday

Markets Around The World

  • Markets in the East closed lower
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 0.764%, down from March 13 close of 0.951%;
    • 30-years is at 1.399%, down from 1.552%
    • 2-years yield is at 0.342% down from 0.502%
    • The 10-Year-&-2-Year spread is at 0.422 down from 0.449
  • VIX
    • Not trading

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 13 was a large red candle with large lower shadow and almost no upper shadow;
    • Stochastic (9,1, 3): %K is crossing above %D; near/below 20
    • RSI (9) is nearing 20
  • Last week was down -261.35 or -8.8%; the 5-week ATR is 268.60
  • Last week’s pivot point=2690.82, R1=2902.79, R2=3094.55; S1=2499.06, S2=2287.09; S1/S2/S3 pivot levels were breached
  • A down week; 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 green candle that opened up then almost tested the previous day’s low and then closed above its high
    • 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; also 38.2% retracement of rally from March-2009
    • %K is crossing above %D;
    • RSI-9 is turning up 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; limit down since 6:00 PM
    • RSI-21 near 20
    • %K is below %D
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Downtrend; Limit down since 6:00 Pm on Sunday
    • RSI-21 is near 20
    • %K is below %D
  • Below, 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Limit down
  • Stochastic (9, 1, 3): %K is below %D
  • Bias: Down

Previous Session

Major U.S. indices closed sharply higher on Friday, March 13 in lower volume. The indices gained more than 9% in the final few minutes of trading. This was news driven and mostly looked like shorts covering.

For the week, major U.S. indices declined sharply in higher volume. The decline was global and across many asset classes.

From Briefing.com:

The stock market rebounded on Friday, though the advance still left the major averages deep in the red for the week. The S&P 500 rallied 9.3%, narrowing this week’s loss to 8.8% while the Russell 2000 (+7.7%; -16.6% for the week) underperformed.

Stocks jumped out of the gate after equity futures hit a circuit breaker, but this time, it was to the upside. The early rally set expectations for a strong rebound, but the bulk of the cash session was not as inspiring. The first three hours of trade saw a pullback, during which the S&P 500 approached yesterday’s closing level.

The index returned to its starting mark in midday trade, but regrouped and staged a huge 6.7% rally in the last 30 minutes as the president was discussing measures to deal with the coronavirus.

Lawmakers in Washington neared an agreement on some fiscal relief measures while President Trump declared a national emergency during a late-afternoon speech. The declaration will allow up to $50 bln in spending. Separately, the president said interest on student loans will be waived until further notice and that the U.S. will be purchasing oil to fill the Strategic Petroleum Reserve.

[…]

• Import prices declined 0.5% month-over-month in February and were up 0.3% excluding fuel. Export prices were down 1.1%, and down 1.0% excluding agricultural products. On a year-over-year basis, import prices were down 1.2%, and down 0.7% excluding fuel. Export prices were down 1.3% yr/yr, and down 1.6% excluding agricultural products.
o The key takeaway from the report is that inflation is still missing for the most part in terms of both import and export prices.
• The preliminary March reading for the University of Michigan’s Index of Consumer Sentiment showed a drop to 95.9 (Briefing.com consensus 96.0) from the final reading of 101.0 for February.
o The key takeaway from the report is that sentiment has been shaken by the spread of the coronavirus and the sharp decline in stock prices, both of which are weighing on expectations that should translate into lower levels of consumer spending activity.

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