Market Remarks

Morning Notes – Friday March 20, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day – a bounce from oversold levels; extreme volatility- watch for break below 2380.75 and break above 2499.00
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2400.37, 2386.94 and 2319.78
  • Critical resistance levels for S&P 500 are 2470.29, 2529.56 and 2553.93
  • Key levels for eMini futures: break above 2499.00, the high of 5:30 AM and break below 2380.75, the low of 1:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June 2020) closed at 2398.25 and the index closed at 2409.39 – a spread of about -11.25 points; futures closed at 2389.00 for the day; the fair value is +9.25
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +64.75; Dow by +636 and NASDAQ by +273.00

Markets Around The World

  • Markets in the East closed up; Tokyo was closed for trading
  • European markets are mostly higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.119%, down from March 18 close of 1.266%;
    • 30-years is at 1.740%, down from 1.897%
    • 2-years yield is at 0.483% down from 0.548%
    • The 10-Year-&-2-Year spread is at 0.636 down from 0.718
  • VIX
    • Is at 65.92 down -5.95 from March 19 close; below 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 green real body with a large upper and lower shadows; previous day’s low was not breached but the high was; past few days’ trading is indicating congestion and a possible bounce from oversold levels
    • %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; rounding bottom emerging; breaking above steep down trendline since March 4 NYSE close but not above a shallower trendline from all time highs
    • RSI-21 rising above 60 after Bullish Divergence
    • %K is crisscrossing %D higher; Bullish Divergence
  • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down
30-Minute (e-mini future)
  • Downtrend; sideways to up move within a very large range since Sunday
    • RSI-21 is rising to 60
    • %K is below %D since 6:00 AM
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to up since 2:30 AM on Thursday
  • The Bollinger Band is large; price walking up the upper band
  • Stochastic (9, 1, 3): %K is below %D since 4:00 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed higher on Thursday, March 19 in mixed volume. NASDAQ Composite and Russell 2000 traded in higher volume.

Most indices made small real body with long upper and lower shadows. Previous day’s lows were not breached but highs were. A break above last two day’s highs will be short term bullish.

From Briefing.com:

The S&P 500 advanced 0.5% on Thursday in a volatile session that saw the benchmark index fall as much as 3.3% in early action and gain as much as 2.9% in the afternoon. The Dow Jones Industrial Average rose 1.0%, while the Nasdaq Composite (+2.3%) and Russell 2000 (+6.8%) were the big movers today amid strong gains in technology and small-cap stocks.

[…]

The S&P 500 consumer discretionary (+3.4%) and energy (+6.8%) sectors presumably outperformed amid tactical trading opportunities and, specifically for the energy space, the 23% spike in WTI crude ($20.42/bbl, +4.71, +23.1%).

[…]

Left out of today’s advance were the defensive-oriented S&P 500 utilities (-5.5%), consumer staples (-2.9%), health care (-1.9%), and real estate (-1.4%) sectors.

U.S. Treasuries finished sharply higher after two days of aggressive selling, driving yields lower across the curve. The 2-yr yield declined 14 basis points to 0.38%, and the 10-yr yield declined 15 basis points to 1.12%. The U.S. Dollar Index advanced 1.5% to 102.67, as demand remained strong for the world’s reserve currency.

[…]

• Initial claims for the week ending March 14 increased by 70,000 to 281,000 (Briefing.com consensus 220,000), bolstered by the impact of the coronavirus. The unadjusted number of initial claims increased by 50,517 to 250,892. Continuing claims for the week ending March 7 increased by 2,000 to 1.701 million.
o The key takeaway from the report is that it is an early warning sign of much larger claims numbers to come considering the fact that many forced, or voluntary, business closures didn’t start to ramp up until the middle of the month with initial expectations that they will be closed at least through the end of March.
• The Philadelphia Fed Index for March dropped to -12.7 (Briefing.com consensus 10.0) from the 36.7 reading in February.
• The current account deficit for the fourth quarter totaled $109.8 billion. The third quarter deficit was revised to $125.4 billion from $124.1 billion.

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