Market Remarks

Morning Notes – Thursday March 19, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for an up day – a bounce from oversold levels; extreme volatility – watch for break below 2327.00 and break above 2401.00
  • Key economic data due:
    • Philly Fed Manufacturing Index ( -12.7 vs. 9.5 est.; prev. 36.7) at 8:30 AM
    • Unemployment Claims ( 281K vs. 220K est.; prev. 211K) at 8:30 AM
    • CB Leading Index (est. 0.1%; prev. .8%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2359.75, 2305.91 and 2280.52
  • Critical resistance levels for S&P 500 are 2409.81, 2453.57 and 2470.29
  • Key levels for eMini futures: break above 2415.00, the high of 4:30 AM and break below 2327.00, the low of 8:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June 2020) closed at 2392.75 and the index closed at 2398.10 – a spread of about -5.25 points; futures closed at 2401.50 for the day; the fair value is -8.75
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -53.25; Dow by -390 and NASDAQ by -106.50

Markets Around The World

  • Markets in the East closed down
  • European markets are mostly lower – Italy and Switzerland are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Palladium
    • Coffee
    • Gold
    • Copper
    • Platinum
    • Sugar
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 1.190%, down from March 18 close of 1.266%;
    • 30-years is at 1.835%, down from 1.897%
    • 2-years yield is at 0.479% down from 0.548%
    • The 10-Year-&-2-Year spread is at 0.711 down from 0.718
  • VIX
    • Is at 79.30 up +2.85 from March 18 close; above 5-day SMA;
    • At highest levels ever

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 small red real body with a large lower shadow and small upper shadow; broke December 20018 support, which is also at the 61.8% Fibonacci retracement of the rally from February 2016 to February 2020 and 38.2% retracement of rally from March-2009
    • %K is above %D; potential Bullish Divergence
    • RSI-9 above 30; below 8-day RSI; Potential Bullish Divergence
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Downtrend; lower lows and lower highs since mid-February;
    • RSI-21 rising above 40; Bullish Divergence at 6:00 PM on Thursday
    • %K is above %D; Bullish Divergence
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Downtrend; sideways move within a very large range since Sunday
    • RSI-21 is between 40 and 30
    • %K is below %D
  • 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 since 9:30 AM on March 18
  • The Bollinger Band is large
  • Stochastic (9, 1, 3): %K is above %D since 8:15 AM after making Bullish Divergence
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, March 18 in mostly higher volume. NASDAQ Composite traded in lower volume.

The indices gapped down at the open and the though the gap was closed during the day, indices made multi-year low. Indices recovered by the end and most made small real body candles with long lower shadow and small upper shadows.

From Briefing.com:

The S&P 500 fell 5.2% on Wednesday, although it did drop as much as 9.8% intraday as pandemic fears continued to hit not only stocks but also Treasuries and commodities. A strong finish also pared losses in the Dow Jones Industrial Average (-6.3%) and Nasdaq Composite (-4.7%) but did little for the Russell 2000 (-10.4%).

[…]

Selling was widespread and was made most pronounced in the cyclical energy (-14.3%), financials (-8.7%), and industrials (-7.2%) sectors. The energy space was crushed by the 24.4% collapse in WTI crude ($20.42/bbl, -$6.06), which fell to its lowest level since 2002. The communication services sector (-2.8%) declined the least today.

[…]

The 2-yr yield rose seven basis points to 0.52%, and the 10-yr rose 27 basis points to 1.27%. The U.S. Dollar Index rose 1.4% to 100.97.

[…]

• Housing starts were stronger than expected in February at a seasonally adjusted annual rate of 1.599 million (Briefing.com consensus 1.475 million), yet they were down 1.5% m/m and will be expected to drop further in March. Building permits were weaker than expected at 1.464 million (Briefing.com consensus 1.480 million) and were down 5.5% m/m.
o The key takeaway from the report is that it will be largely dismissed on the grounds that it is “old” data in a new world that is dealing with economic shutdown measures to curb the spread of COVID-19.
• The weekly MBA Mortgage Applications Index declined 8.4% following last week’s 55.4% surge.

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