Market Remarks

Morning Notes – Thursday April 2, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher to unchanged; were higher before Unemployment Claims report; down from 2502.00 at 4:00 AM to near 2460.00 at 9:00 AM
  • The odds are for a sideways to down day from pre-NYSE session levels with high volatility – watch for break above 2502.00 for change of fortune
  • Key economic data due:
    • Unemployment Claims ( 6648K vs. 3600K est.; prev. 3307K ) at 8:30 AM
    • Trade Balance ( -39.9B vs. -40.6B est ; prev. -45.5B) at 8:30 AM
    • Factory Orders ( est. 0.2%; prev. -0.5%) 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-Side
  • 6-Min: Side-Down

Key Levels:

  • Critical support levels for S&P 500 are 2447.49, 2407.53 and 2360.25
  • Critical resistance levels for S&P 500 are 2494.67, 2522.75 and 2574.84
  • Key levels for eMini futures: break above 2498.50, the high of 8:00 AM and break below 2434.25, the low of 3:30 PM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2456.50 and the index closed at 2470.50 – a spread of about -14.00 points; futures closed at 2448.00 for the day; the fair value is +8.50
  • Pre-NYSE session open, futures are mixed – at 8:30 AM, S&P 500 futures were up by +12.50; Dow up by +32 and NASDAQ down by -1.25

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo and Sydney closed down; Mumbai was closed for trading
  • European markets are mostly higher – Germany and France are down
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.596%, down from April 1 close of 0.635%;
    • 30-years is at 1.241%, down from 1.289%
    • 2-years yield is at 0.230% up from 0.211%
    • The 10-Year-&-2-Year spread is at 0.366 down from 0.424
  • VIX
    • Is at 53.59 down -3.47 from April 1 close; below 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 tear drop type of spinning top red candle that gapped down and did not fill the gap; small upper and lower shadows
    • %K is below %D
    • RSI-9 is moving down from near 50; below 8-day RSI;
  • Below 20-day EMA; below 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Moving within a horizontal channel since 12:00 PM on March 25 between 2445.00 and 2635.00; rising from the lower bound since 2:00 PM on Wednesday
    • moving within a bigger horizontal channel since 10:00 PM on March 11 between 2650.00 and 2174.00, which has potential to become an uneven inverse Head-&-Shoulder pattern;
    • RSI-21 rising since 4:00 PM on Tuesday from near 20 to near 45
    • %K is crisscrossing %D higher from below 20
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Moving up since 3:30 AM on Wednesday from 2434.25; within a horizontal trading channel between 2634.50 and 2445.00
    • RSI-21 moving around 40;
    • %K is crisscrossing %D lower
  • At/above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to up since 6:30 PM on Wednesday
  • The Bollinger Band is relatively narrow since 10:00 PM
  • Stochastic (9, 1, 3): %K is below %D since 8:00 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, April 1 in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume. Most indices gapped down at the open and then mostly traded lower.

From Briefing.com:

The S&P 500 (-4.4%), Dow Jones Industrial Average (-4.4%), and Nasdaq Composite (-4.4%) each fell 4.4%. The Russell 2000 underperformed with a 7.1% decline.

[…]

In turn, no S&P 500 sector was spared in today’s sell-off with ten sectors losing at least 3.0%, including 6.1% declines in the real estate and utilities sectors. The consumer staples sector performed relatively better with a 1.8% decline.

[…]

U.S. Treasuries finished mixed with longer-dated Treasuries advancing in a safe-haven bid. The 2-yr yield increased two basis points to 0.22%, while the 10-yr yield declined six basis points to 0.64%. The U.S. Dollar Index rose 0.5% to 99.50.

[…]

• The ISM Manufacturing Index for March registered a reading of 49.1% (Briefing.com consensus 43.3%), down from 50.1% in February. The dividing line between expansion and contraction is 50.0%.
o The key takeaway for some will be that the number wasn’t as bad as feared, but lost in that takeaway is the fact that the overall index was supported by a sizable uptick in the supplier deliveries index (to 65.0% from 57.3%), which reflects slower delivery times that are a byproduct of the COVID-19 response that has disrupted supply networks. Translation: the March number is not as encouraging as it seems at first blush.
• Total construction spending declined 1.3% m/m in February (Briefing.com consensus +0.5%) on the heels of an upwardly revised 2.8% increase (from +1.8%) in January. Residential spending was down 0.6% m/m while nonresidential spending declined 1.6% m/m.
o The key takeaway from the report is that it is relatively meaningless for a market that is pre-occupied with the economic view ahead due to the shutdown measures that started to hit home in March to deal with containing the spread of COVID-19.
• The ADP Employment Change report pointed to a net loss of 27,000 nonfarm payrolls in March (Briefing.com consensus -175,000) while the February reading was revised down to 179,000 from 183,000.
• The weekly MBA Mortgage Applications Index increased 15.3% following a 29.4% drop in the prior week.

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