Market Remarks

Morning Notes – Friday April 3, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; gradually rising since 1:00 AM
  • The odds are for a sideways to up day from pre-NYSE session levels with high volatility – watch for break below 2487.00 for change of fortune
  • Key economic data due:
    • Non-Farm Employment Change ( -700K vs. -100K est.; prev. 2737K ) at 8:30 AM
    • Average Hourly Earnings ( ).4% vs. 0.2% est ; prev. 0.3%) at 8:30 AM
    • Unemployment Rate ( 4.4% vs. 3.8% est.; prev. 3.5%) at 8:30 AM
    • Final Services PMI ( est. 38.7; prev. 39.1) at 10:00 AM
    • ISM Non-Manufacturing PMI ( est. 43.2; prev. 57.3) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2492.10; 2467.68 and 2447.49
  • Critical resistance levels for S&P 500 are 2533.22, 2571.15 and 2612.09
  • Key levels for eMini futures: break above 2525.00, the high of 4:00 PM and break below 2474.25, the low of 1:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P future (June 2020) closed at 2516.00 and the index closed at 2526.50 – a spread of about -14.00 points; futures closed at 2516.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 8:15 AM, S&P 500 futures were down by -15.75; Dow by -135 and NASDAQ by -43.25

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo and Seoul closed up;
  • European markets are mixed – Germany, Spain and Switzerland are up; U.K., France, Italy and STOXX 600 are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Sugar
    • Cotton
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.627%, down from April 1 close of 0.635%;
    • 30-years is at 1.270%, down from 1.289%
    • 2-years yield is at 0.234% up from 0.211%
    • The 10-Year-&-2-Year spread is at 0.393 down from 0.424
  • VIX
    • Is at 50.30 down -0.61 from April 2 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 bullish engulfing candle with very small upper and lower shadows
    • %K is crossing above %D
    • RSI-9 is turning up near 45; at/above 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 and retested at 8:00 AM on Thursday
    • 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; Bullish Divergence at 8:00 AM on Thursday
    • %K is above %D
  • At/below 20-bar EMA; at/above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 3:30 AM on Wednesday from 2434.25, retested on Thursday; within a horizontal trading channel between 2634.50 and 2445.00
    • RSI-21 rising since Wednesday; Bullish Divergence on Thursday; near 60;
    • %K is above %D
  • Above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to up since 6:30 PM on Wednesday
  • The Bollinger Band relatively narrowed since 9:00 PM; expanding since 7:30 AM with price walking up the upper band
  • Stochastic (9, 1, 3): %K is below %D since 7:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Thursday, April 2 in mixed volume after two down days. Dow Jones Industrial Average and NASDAQ Composite traded in higher volume. Most indices made bullish engulfing candle. Russell 200 was an exception.

From Briefing.com:

[…]

The S&P 500 (+2.3%) and Dow Jones Industrial Average (+2.2%) set the pace with gains over 2.0%, followed by the Nasdaq Composite (+1.7%) and Russell 2000 (+1.3%).

[…]

Nevertheless, the bounce in oil was a much-needed reprieve for companies within the S&P 500 energy sector (+9.1%), which led all sectors in gains by a wide margin. The utilities sector (+3.2%) was next in line, while the consumer discretionary sector (+0.4%) was today’s laggard.

[…]

U.S. Treasuries finished mixed and little changed. The 2-yr yield increased one basis point to 0.23%, while the 10-yr yield declined one basis point to 0.63%. The U.S. Dollar Index increased 0.5% to 100.19.

[…]

• For the week ending March 28, initial claims spiked by 3,341,000 to a seasonally adjusted 6,648,000 (Briefing.com consensus 2,800,000). Continuing claims for the week ending March 21 spiked by 1,245,000 to 3,029,000, which is the highest level since July 6, 2013.
o The key takeaway from the report is that it speaks to how bad things are right now for so many people due to the sudden economic stop, but, unfortunately, the report itself likely still doesn’t reflect the full extent of the layoff picture.
• The trade deficit narrowed to $45.3 billion (Briefing.com consensus -$46.0 billion) in January from an upwardly revised -$48.6 billion ( from -$48.9 bln) in December.
o The key takeaway from the report is that it featured a decline in both exports and imports; however, the understanding that this is a January report (i.e. doesn’t capture the brunt of the coronavirus impact) will diminish market interest in it.
• Factory orders were unchanged m/m in February (Briefing.com consensus +0.3%) following an unrevised 0.5% decline in January. Shipments were down 0.2% m/m in February after decreasing 0.6% in January.
o The key takeaway from the report is that it showed business spending was relatively soft in February, which is expected to give way to an extremely sharp contraction in March.

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