Market Remarks

Morning Notes – Friday March 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; declining since 7:45 PM on Thursday – down 100 points
  • The odds are for a sideways to down day with extreme volatility – watch for break above 2567.75 and break 2527.00 for clarity
  • Key economic data due:
    • Core PCE Price Index ( 0.2% vs. 0.2% est.; prev. 0.1%) at 8:30 AM
    • Personal Income ( 0.6% vs. 0.4% est.; prev. 0.6%) at 8:30 AM
    • Personal Spending (0.2% vs. 0.2%; prev. 0.2%) at 8:30 AM
    • Revised UoM Consumer Sentiment ( 90.0 est.; prev. 95.9) at 10:00 AM
    • Revised UoM Inflation Expectations (prev. 2.3%) at 10:00 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

Key Levels:

  • Critical support levels for S&P 500 are 2574.92, 2557.87 and 2500.72
  • Critical resistance levels for S&P 500 are 2637.01, 2710.89 and 2722.88
  • Key levels for eMini futures: break above 2567.75, the high of 6:30 AM and break below 2527.00, the low of 8:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P future (June 2020) closed at 2609.00 and the index closed at 2630.07 – a spread of about -21.00 points; futures closed at 2608.00 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are lower – at 8:00 AM, S&P 500 futures were down by -78.50; Dow by -708 and NASDAQ by -208.50

Markets Around The World

  • Markets in the East closed mostly higher – Sydney and Mumbai closed lower
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • EUR/USD
    • USD/JPY
    • USD/CHF
  • Commodities:
    Up Down
    • Crude Oil
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • NatGas
    • Gold
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.811%, down from March 25 close of 0.858%;
    • 30-years is at 1.395%, down from 1.423%
    • 2-years yield is at 0.308% down from 0.336%
    • The 10-Year-&-2-Year spread is at 0.503 down from 0.522
  • VIX
    • Is at 67.05 up +6.05 from March 26 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, 39-week SMA and 89-week SMA
  • In Correction
Daily
  • A large green candle with almost no upper and lower shadows; opened up and did not come near to previous day’s close;
    • %K is above %D; above 90
    • RSI-9 rises above 50; 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 2634.50 reached at 6:00 PM on Thursday
    • 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 6:00 PM on March 26 from near 75 to 55
    • %K is crisscrossing %D lower
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways to down since 11:30 AM on Thursday; rising since 6:00 PM on Sunday; higher highs and higher lows but within a larger downtrend;
    • RSI-21 declined to near 50 after moving along 65 for sometime
    • %K is crossing above %D at 6:00 AM
  • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to down since 2:30 PM on Thursday
  • The Bollinger Band is relatively narrow since 1:45 AM
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Thursday, March 26 in lower volume. All S&P sectors closed up for the day.

U.S. indices opened up and then mostly advanced higher with a brief pullback in early afternoon trading. The next resistance is the upper bound of gap down open of March 12.

From Briefing.com:

The S&P 500 extended its weekly rally by 6.2% on Thursday after the Senate approved the $2 trillion fiscal stimulus package for the economy, which saw a record surge in weekly jobless claims. The Dow Jones Industrial Average rose 6.4%, the Nasdaq Composite rose 5.6%, and the Russell 2000 rose 6.3%.

[…]

The S&P 500 closed at session highs and up 20.0% from its Monday intraday low. All 11 S&P 500 sectors posted strong gains today between 4.3% (consumer discretionary) and 8.4% (utilities). Oil prices ($22.60, -1.93, -7.9%) were unable to catch a bid, though, partly due the oil industry not being included in this stimulus bill.

[…]

U.S. Treasuries finished the session on a higher note, as the record number of unemployment claims reminded bond investors of the negative macro environment. The 2-yr yield declined four basis points to 0.26%, and the 10-yr yield declined five basis points to 0.81%. The U.S. Dollar Index fell back below 100.00, finishing 1.6% lower at 99.43.

[…]

• Initial claims for the week ending March 21 increased by 3,001,000 to 3,283,000. That is the highest seasonally adjusted number for initial claims by many miles. The prior record was 695,000 in October 1982. Continuing claims for the week ending March 14 increased by 101,000 to 1,803,000, but that number will skyrocket next week as well.
o The key takeaway from the report is that it underscores for everyone how much worse the current economic situation is than anything else experienced in this modern age. It is a stark reflection that this time is different.
• The third estimate for Q4 GDP showed a 2.1% annualized rate of growth that was in-line with the second estimate and the Briefing.com consensus estimate. Similarly, the GDP Price Deflator was left unchanged at 1.3%, as expected.
o The key takeaway from the report is that it is inconsequential at this juncture. That would be the effective takeaway in normal times (we’re less than a week away from the end of Q1), but things are no longer normal as the first quarter is ending with the U.S. economy in shutdown mode to help stop the spread of COVID-19.
• The advance goods trade deficit totaled $59.89 bln in February after a $65.9 bln deficit in January. Advance retail inventories decreased 0.3% in February after decreasing 0.1% in January. Advance wholesale inventories decreased 0.5% in February after decreasing 0.5% in January.

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