Market Remarks

Morning Notes – Thursday March 26, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; declining since 2:00 PM on Wednesday – down 150 points
  • The odds are for a sideways to down day with extreme volatility – watch for break above 2451.25 and break 2387.00 for clarity
  • Key economic data due:
    • Unemployment Claims ( 3283K vs. 1648K; prev. 281K) at 8:30 AM
    • Final GDP ( 2.1% vs. 2.1%; prev. 2.1%) at 8:30 AM
    • Final GDP Price Index (1.3% vs. 1.3%; prev. 1.3%) at 8:30 AM
    • Good Trade Balance ( -59.9B vs. -64.5B; prev. -65.9B) at 8:30 AM
    • Prelim Wholesale Inventories (-0.5% vs. -0.2%; prev. -0.4%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2453.62, 2407.53 and 2360.25
  • Critical resistance levels for S&P 500 are 2465.20, 2555.87 and 2571.42
  • Key levels for eMini futures: break above 2451.25, the high of 6:30 AM and break below 2406.50, the low of 8:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2466.75 and the index closed at 2475.56 – a spread of about -9.75 points; futures closed at 2467.00 for the day; the fair value is -0.75
  • Pre-NYSE session open, futures are lower – at 8:00 AM, S&P 500 futures were down by -58.25; Dow by -438 and NASDAQ by -137.00

Markets Around The World

  • Markets in the East closed mostly lower – Sydney and Mumbai closed up
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Sugar
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.858%, up from March 24 close of 0.816%;
    • 30-years is at 1.423%, up from 1.369%
    • 2-years yield is at 0.336% down from 0.371%
    • The 10-Year-&-2-Year spread is at 0.522 up from 0.445
  • VIX
    • Is at 63.96 up +0.01 from March 25 close; above 5-day SMA;
    • Down from all time high of 85.47 on March 18

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 small green candle with long upper and lower shadows; the real body is above previous day’s high;
    • %K is above %D; above 50
    • RSI-9 turned up from below 30 to above 40; Bullish Divergence; above 8-day RSI;
  • Below 20-day EMA, 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Bouncing off Sunday’s gap-down open low near 2174.00; pulling back down from the high of 2560.75 reached at 12:00 PM on Wednesday
    • Downtrend since February 19; sequence of lower lows and lower highs since mid-February is broken; broke above a downtrend line from March 4 high;
    • RSI-21 declining since 4:00 PM on March 24
    • %K is crisscrossing %D lower since Tuesday
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Rising since 6:00 PM on Sunday; higher highs and higher lows but within a larger downtrend; sideways move since 0:30 AM on Wednesday
    • RSI-21 declined to below 50 from above 65
    • %K is above %D since 3:30 AM
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to down since 3:45 PM
  • The Bollinger Band is narrowing since 9:45 PM
  • Stochastic (9, 1, 3): %K is above %D since 4:45 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, March 25 in mixed volume. NASDAQ Composite closed down. Dow Jones Transportation Average and S&P 500 and  traded in higher volume.

U.S. indices opened up and the declined in the first hour of trading before resuming the upward move. Towards day’s end, indices gave up most of the gains and closed near the open. Most made small real body with long upper and lower shadows indicating indecision.

From Briefing.com:

The S&P 500 advanced as much as 5.1% on Wednesday, as investors continued to buy beaten-up shares of companies after the Senate agreed to a revised stimulus plan, but the market faltered into the close amid some political drama and profit taking. The benchmark index finished up 1.2% for the session.

The Dow Jones Industrial Average (+2.4%) outperformed on the back of Boeing (BA 158.73, +31.05, +24.3%). The Russell 2000 increased 1.3%, while Nasdaq Composite declined 0.5%.

[…]

By session’s end, eight of the 11 S&P 500 sectors still closed higher, led by the industrials (+5.3%), energy (+4.5%), and real estate (+4.5%) sectors. The communication services sector (-1.6%) was dragged lower by an acknowledgement from Facebook (FB 156.21, -4.77, -3.0%) that it has seen a weakening in its ads business.

[…]

U.S. Treasuries finished mixed with shorter-dated maturities posting gains that drove yields on the four-week bill (-6 bps to -0.05%) and three-month bill (-4 bps to -0.03%) negative. The 2-yr yield declined seven basis points to 0.30%, while the 10-yr yield increased four basis points to 0.86%. The U.S. Dollar Index declined 1.2% to 100.86. WTI crude rose 2.5%, or $0.60, to $24.53/bbl.

[…]

• February durable goods orders increased 1.2% (Briefing.com consensus -1.4%). Excluding transportation, durable goods orders declined 0.6% (Briefing.com consensus -0.2%).
o The key takeaway from the report is that business spending was soft in February, which is disappointing in and of itself, but all the more disappointing knowing that it is going to collapse now in the face of the shutdown measures adopted to stop the spread of the coronavirus.
• The FHFA Housing Price Index increased 0.3% in March after increasing 0.6% in February.
• The weekly MBA Mortgage Applications Index dropped 29.4% following an 8.4% decline in the prior week.

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