Morning Notes – Wednesday April 8, 2020

/ April 8, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a down to sideways day from pre-open levels; elevated volatility – watch for break above 2680.50 for change of fortune
  • Key economic data due:
    • FOMC Meeting Minutes

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2657.67, 2634.05 and 2620.52
  • Critical resistance levels for S&P 500 are 2701.88, 2711.20 and 2746.03
  • Key levels for eMini futures: break above 2680.50, the high of 1:30 AM and break below 2627.25, the low of 2:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P future (June 2020) closed at 2649.75 and the index closed at 2659.41 – a spread of about -9.75 points; futures closed at 2642.00 for the day; the fair value is +7.75
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +20.50; Dow by +198 and NASDAQ by +77.00

Markets Around The World

  • Markets in the East closed mostly lower – Tokyo was up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • EUR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Palladium
    • Sugar (Unch.)
    • Cotton
    • Silver
    • Copper
    • Platinum
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.736%, up from April 6 close of 0.676%;
    • 30-years is at 1.332%, up from 1.284%
    • 2-years yield is at 0.268% unchanged
    • The 10-Year-&-2-Year spread is at 0.468 up from 0.408
  • VIX
    • Is at 46.27 down -0.43 from April 7 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 April 3 was a relatively small red candle with long upper and lower shadows
    • Stochastic (9,1, 3): %K is above %D near 20
    • RSI (9) is turning down; near 30
  • Last week was down -52.82 or -2.1%; the 5-week ATR is 359.65
  • Last week’s pivot point=2525.84, R1=2504.20, R2=2719.74; S1=2410.30, S2=2331.94; S1/R1 pivot levels were breached
  • A down week; third in last five weeks and sixth 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 large red candle that gapped up at the open but then closed below previous day’s close; almost no lower shadow and very small upper shadow;
    • forming an ABCD pattern; achieved 61.8% extension target near 2725.00
    • %K crossing below %D from above 90; potential Bearish Divergence
    • RSI-9 turning down but rising in zig-zag move; above 50; above 8-day RSI;
  • Above 20-day EMA; below 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Declining from a resistance level around 2700.00-to-2750 since 8:00 AM on Wednesday; retraced down to just above a support level – the upper bound of a horizontal channel that was formed from March 25 to April 6 between 2445.00 and 2635.00;
    • the 61.8% extension target near 2750 of the previously broken channel was achieved; 100% extension target is near 2825.00
    • also broke above a bigger horizontal channel – from March 11 to April 6 between 2650.00 and 2174.00; the 61.8% extension target is near 2944.00 and 100% extension target is near 3126.00
    • Uptrend – high highs & higher lows – since 10:00 AM on March 23
    • RSI-21 has declined to just below 50 from above 80
    • %K is crisscrossing %D around 30
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving sideways since 3:30 PM after declining from a high of 2750.00 at 9:30 AM on Tuesday; sequence of  higher highs and higher lows since 2:00 PM on April 3 is broken
    • RSI-21 declined to 40 from above 65 and moving around 50 since 0:30 AM
    • %K is above %D since 5:30 AM
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways since 9:45 PM
  • The Bollinger Band was relatively stable since 9:45 PM
  • Stochastic (9, 1, 3): %K is above %D sinc e6:00 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Tuesday, April 7 in mostly higher volume. Dow Jones Industrial Average traded in lower volume.

Indices gapped up at the open and then started to trade down. A brief rally early fizzled out and the down move started in earnest in late morning session. Most indices made relatively large red candle and gave up significant gains of the opening gap. Previously reversal from such high levels occurred during 2008 crisis.

Five S&P sectors – Consumer Staples, Industrials, Technology, Utility and Healthcare – closed lower. Real Estate was unchanged and other six closed higher.

From Briefing.com:

The major averages ended Tuesday with modest losses after surrendering their opening gains. The S&P 500 (-0.2%) slipped four points after starting the day with a 93-point gain while the Nasdaq (-0.3%) underperformed slightly.

[…]

Six out of eleven sectors ended the day with gains ranging from 0.1% (real estate) to 2.4% (materials) while the top-weighted technology sector (-1.1%) underperformed from the start.

[…]

On the flip side, materials (+2.4%) and energy (+2.0%) outperformed throughout the day. The energy sector was able to remain in the green, even though crude oil slumped into the pit close, ending lower by 9.3% at $23.78/bbl.

[…]

Treasuries retreated during the first half of the session but narrowed their losses as the day went on. The 10-yr yield ended higher by six basis points at 0.74%.
The U.S. Dollar Index fell 0.8% to 99.88, returning to levels from Thursday.

[…]

• The NFIB Small Business Optimism Index fell to 96.4 in March from 104.5 in February
• Job openings decreased to 6.882 mln in February from a revised 7.012 mln (from 6.963 mln) in January
• Consumer credit expanded by $22.30 bln in February (Briefing.com consensus $14.00 bln) after increasing by a revised $12.10 bln (from $12.00 bln) in January.

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