Market Remarks

Morning Notes – Monday March 30, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher
  • The odds are for a sideways to an up day with high volatility – watch for break below 2495.00 for change of fortune
  • Key economic data due:
    • Pending Home Sales (est. -1.8%; prev. 5.2%) 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-Side

Key Levels:

  • Critical support levels for S&P 500 are 2534.99, 2520.02 and 2500.72
  • Critical resistance levels for S&P 500 are 2577.38, 2615.91 and 2637.01
  • Key levels for eMini futures: break above 2567.75, the high of 1:30 AM and break below 2495.00, the low of 3:30 AM

Pre-Open

  • On Friday at 4:00 PM, S&P future (June 2020) closed at 2532.00 and the index closed at 2541.47 – a spread of about -9.50 points; futures closed at 2524.00 for the day; the fair value is +8.00
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +33.75; Dow by +266 and NASDAQ by +103.00

Markets Around The World

  • Markets in the East closed mostly lower – Sydney closed up
  • European markets are mixed – U.K., France, Spain and Italy are down; Germany, Switzerland and STOXX 600 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
    • Gold
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
  • Bond
    • 10-yrs yield is at 0.648%, down from March 27 close of 0.749%;
    • 30-years is at 1.240%, down from 1.337%
    • 2-years yield is at 0.269% up from 0.246%
    • The 10-Year-&-2-Year spread is at 0.379 down from 0.503
  • VIX
    • Is at 63.44 down -2.10 from March 27 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 27 was a large bullish engulfing candle with almost equal sized upper and lower shadows, which are about half the size of the real body; the lows and highs breached the lows and highs of previous week.
    • Stochastic (9,1, 3): %K crossed above %D from below 20
    • RSI (9) is turning up to 30 from 15
  • Last week was up +236.55 or +10.3%; the 5-week ATR is 417.25
  • Last week’s pivot point=2456.78, R1=2721.70, R2=2901.93; S1=2276.55, S2=2011.63; S1/R1 pivot levels were breached
  • An up week; second in last five weeks and fourth in last ten weeks
  • All time high of 3393.52, the last swing high, was during the week of February 17; broke below the low of the week of December 24 2018; support near the high of 2193.81 during the week of August 15, 2016; sequence of higher highs and higher lows broken
  • Below 10-week EMA and 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A small red harami candle with long upper and lower shadows; high and low were within the real body of Thursday
    • %K is above %D; turning down from above 90
    • RSI-9 turning down from near 50; 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)
  • Moving sideways around 2550.00 since 10:00 AM on March 26; bounced off March 22 gap-down low near 2174.00;
    • 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 around/below 50 since 4:00 AM on March 27
    • %K is crisscrossing %D higher
  • At/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 March 26; large range between 2630.00 and 2450.00; higher highs and higher lows since March 22 but within a larger downtrend;
    • RSI-21 around 50; moving between 65 and 40 since 8:00 PM on March 26
    • %K is above %D since 4:00 AM
  • At/below 20-bar EMA, above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to up since 10:45 PM on Sunday
  • The Bollinger Band is relatively stable but large since 1:30 AM
  • Stochastic (9, 1, 3): %K is crisscrossing %D upper
  • Bias: Up-Side

Previous Session

Major U.S. indices closed lower on Friday, March 27 in lower volume. All but two – Utilities and Real Estate – S&P sectors closed down for the day. Most major indices made harami like spinning top candle.

For the week, major U.S. indices closed higher in lower volume. Most Asian and European markets also closed up. Mumbai was down. U.S. Dollar and crude oil closed down for the year. Most other commodities closed up. U.S. treasuris closed up.

From Briefing.com:

The S&P 500 declined 3.4% on Friday after a rebound effort faded into the close, as investors took weekly profits. The benchmark index had started the session down 4.2%, then cut its losses to just 0.5% after the House passed the $2 trillion stimulus bill in the afternoon.

The Dow Jones Industrial Average lost 4.1%, the Nasdaq Composite lost 3.8%, and the Russell 2000 lost 4.1%.

[…]

U.S. Treasuries ended the week on a higher note, driving yields lower across the curve. The 2-yr yield declined three basis points to 0.23%, and the 10-yr yield declined six basis points to 0.75%. The U.S. Dollar Index declined 1.0% to 98.36. WTI crude lost another 4.2%, or $0.95, settling lower at $21.65/bbl.

[…]

• Personal income increased 0.6% m/m in February (Briefing.com consensus +0.4%) while personal spending rose 0.2%, as expected. The PCE Price Index increased 0.1% while the core PCE Price Index, which excludes food and energy, rose 0.2%, both as expected.
o The key takeaway from the report would have been that inflation remains subdued and that the income growth is a plus for consumer spending, but with the subsequent shutdown due to the coronavirus, the key takeaway now is that this February report is cold comfort in a world far different than the one that existed in February.
• The final reading for the University of Michigan Index of Consumer Sentiment for March was revised down to 89.1 (Briefing.com consensus 95.7) from the preliminary reading of 95.9. The final reading for February was 101.0.
o The key takeaway from the report is that it captures the leading wave of the change in consumer sentiment, which is deteriorating rapidly in the face of the coronavirus impact on the U.S. economy. According to the report, the 11.9-point drop from February is the fourth largest one-month decline in nearly a half century.

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