Market Remarks

Morning Notes – Monday March 23, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are erratic;
  • The odds are for an up day – a bounce from oversold levels; extreme volatility- watch for break below 2204.50
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2295.56, 2280.52 and 2271.65, the low of February 2017
  • Critical resistance levels for S&P 500 are 2356.30, 2404.30 and 2452.80
  • Key levels for eMini futures: break above 2385.25, the high of 8:00 AM and break below 2204.50, the low of 7:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (June 2020) closed at 2284.25 and the index closed at 2304.92 – a spread of about -16.50 points; futures closed at 2288.50 for the day; the fair value is -4.25
  • Pre-NYSE session open, futures are higher – at 9:15 AM, S&P 500 futures were up by +19.50; Dow by +107 and NASDAQ by +101.00

Markets Around The World

  • Markets in the East closed mostly down ; Tokyo was up
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Crude Oil
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 0.828%, down from March 20 close of 0.938%;
    • 30-years is at 1.520%, down from 1.556%
    • 2-years yield is at 0.294% down from 0.343%
    • The 10-Year-&-2-Year spread is at 0.534 down from 0.595
  • VIX
    • Is at 65.69 down -0.35 from March 20 close; below 5-day SMA;
    • Near 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 20 was a large red candle with small upper and lower shadows; broke December 2018 support and is at the congestion area – sideways to up trend – during the Q1 of 2017;
    • Stochastic (9,1, 3): %K is below %D; below 20
    • RSI (9) is nearing 15
  • Last week was down -406.10 or -15.0%; the 5-week ATR is 341.23
  • Last week’s pivot point=2382.81, R1=2485.09, R2=2665.27; S1=2202.63, S2=2100.25; S1/S2 pivot levels were breached
  • A down week; fourth in last five weeks and sixth 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 small upper and lower shadows; breading engulfing; previous day’s low was breached but not the high was;
    • %K is below %D;
    • RSI-9 turned down but still above 30; below 8-day RSI;
  • 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; gapped down at the open of the week but is bouncing up from those low levels – bounced up more than 200 point from the low of 2174.00 at one time
    • RSI-21 rising above 60 after Bullish Divergence
    • %K is above %D higher; Bullish Divergence
  • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Downtrend; reached limit down during early Asian session for some time; above those levels but very erratic or volatile
    • RSI-21 is rising above 60
    • %K is crisscrossing %D
  • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moved sideways from 11:00 PM to 7:45 AM; moving up since
  • The Bollinger Band was relatively small but still large, overnight; expanding even more since 7:45;
  • Stochastic (9, 1, 3): %K is below %D since 8:45 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Friday, March 20 in mostly higher volume. NASDAQ Composite traded in lower volume. Indices opened up at the open and then advanced for an hour or so before turning around and accelerating the losses near the close.

For the week, global market declined in double digits. The U.S. indices mostly traded in higher volume for the week. S&P 500 and JNADAQ Composite traded in lower volume during the week. European and Asian markets also declined significantly. Switzerland was up for the week.

US Dollar gained against other major currencies except Japanese Yen and Swiss Franc. Most commodities also declined – palladium, wheat, soybeans, coffee and cattle advanced. 10-year Treasury yields were up for the week but 30-year yields were down. 2-year yield were also up. All three yields were up week before too.

From Briefing.com:

An early rebound effort quickly turned into losses on this quadruple-witching expiration Friday, as investors continued to grapple with the persistent shutdown of the economy. The S&P 500 (-4.3%), Dow Jones Industrial Average (-4.6%), and Russell 2000 (-4.2%) declined more than 4.0%, while the Nasdaq Composite declined 3.8%.

[…]

Losses were widespread, but the energy sector (+1.0%) was able to buck the broader trend, and trim its huge weekly decline, despite an 8% decline in oil prices ($23.73/bbl, -2.17, -8.4%). The utilities (-8.2%) and consumer staples (-6.5%) sectors were today’s weakest performers.

[…]

U.S. Treasuries gained buying interest amid the selling in equities and actions taken by the Fed. The 2-yr yield declined three basis points to 0.37%, and the 10-yr yield declined 18 basis points to 0.94%. The U.S. Dollar Index finished flat at 102.72.

[…]

• The key takeaway from the report is that existing home sales activity was robust in February based on contract signings that happened in December and January. Next month could look reasonably good, too, but the excitement over this report has been tempered by expectations that a meaningful slowdown will soon follow because of the coronavirus impact.

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