Market Remarks

Morning Notes – Wednesday April 1, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower
  • The odds are for a down day with high volatility – watch for break above 2512.00 for change of fortune
  • Key economic data due:
    • ADP Non-Farm Employment Change ( -27K vs. -150K est.; prev. 179K ) at 8:30 AM
    • Final Manufacturing PMI (est. 48.2; prev. 49.2) at 9:45 AM
    • ISM Manufacturing PMI ( est. 44.9; prev. 50.1) at 10:00 AM
    • Construction Spending ( est. 0.6%; prev. 1.8% ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2465.20, 2407.53 and 2360.25
  • Critical resistance levels for S&P 500 are 2530.02, 2534.99 and 2571.15
  • Key levels for eMini futures: break above 2506.00, the high of 6:00 AM and break below 2467.25, the low of 8:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P future (June 2020) closed at 2572.50 and the index closed at 2584.59 – a spread of about -12.00 points; futures closed at 2569.75 for the day; the fair value is +2.75
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -90.50; Dow by -758 and NASDAQ by -217.50

Markets Around The World

  • Markets in the East closed mostly lower – Sydney closed up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Crude Oil
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.611%, down from March 31 close of 0.698%;
    • 30-years is at 1.250%, down from 1.351%
    • 2-years yield is at 0.226% down from 0.246%
    • The 10-Year-&-2-Year spread is at 0.385 down from 0.452
  • VIX
    • Is at 60.14 up +6.60 from March 31 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
  • March 2020 was a large red top candle with large upper and lower shadows; index declined 12.5%;
    • Stochastic %K is below %D and near 30; %K Bearish Divergence
    • RSI-9 declined from above 75 to near 30; Bearish Divergence
    • Broke below the lower band of the 120-month regression channel to middle of the band; only third time since 2009 but first close below the lower bound
  • Sequence of higher highs and higher lows broken
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 relatively small red harami candle with small upper and lower shadows;
    • %K is turning below %D from near 90
    • RSI-9 turning down from near 50; above 8-day RSI;
  • At/below 20-day EMA; below 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Moving sideways to down since March 26; moving down since 4:00 AM on Tuesday
    • 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 declined to near 25
    • %K is crisscrossing %D below 20
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Side-Down
30-Minute (e-mini future)
  • Moving down since 4:30 AM on Tuesday; near March 29 low of 2445.00, a break below will have next support at 2400.00 level
    • RSI-21 moving around 30;
    • %K is crisscrossing %D
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving down since 8:45 PM on Tuesday
  • The Bollinger Band is relatively narrow since 6:15 AM
  • Stochastic (9, 1, 3): %K is above %D since 8:30 AM
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Tuesday, March 31 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. Most indices made small, relatively, harami spinning top candles. Indices opened near the high for the day and them mostly traded down. All S&P sectors closed down for the day except Energy.

From Briefing.com:

The stock market ended the tumultuous first quarter in negative territory on Tuesday, while investors continued to assess the latest news on the coronavirus and the policies proposed to address its impact. The S&P 500 closed near session lows with a 1.6% decline after a brief stay in positive territory early in the session.

The Dow Jones Industrial Average lost 1.8%, the Nasdaq Composite lost 1.0%, and the Russell 2000 lost 0.5%.

[…]

U.S. Treasuries had a relatively quiet day, ultimately closing mixed and little changed. The 2-yr yield declined one basis point to 0.20%, while the 10-yr yield increased three basis points to 0.70%. The U.S. Dollar Index declined 0.2% to 98.99. WTI crude increased 1.5% to $20.52/bbl, although it was up more than 8% in the session.

[…]

• The Conference Board’s Consumer Confidence Index for March dropped to 120.0 (Briefing.com consensus 110.0) from an upwardly revised 132.6 (from 130.7) for February. The March reading is the lowest since July 2017.
o The key takeaway from the report is that the downturn was not as bad as feared; however, the prevailing expectation is that consumer confidence will get much worse due to the impact of the coronavirus and its effect on consumer attitudes about job security and income growth prospects.
• The Chicago PMI decreased to 47.8 in March (Briefing.com consensus 40.0) from 49.0 in February.
• The S&P Case-Shiller Home Price Index for January increased 3.1% following an upwardly revised 2.8% increase in December (from +2.9%).

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