Morning Notes – Thursday April 9, 2020

/ April 9, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility – watch for break below 2727.50 for change of fortune
  • Key economic data due:
    • Fed 2.3T Loan Program Announcement
    • Unemployment Claims (6606K vs. 5000K est.; prev. 6867K) at 8:30 AM
    • Core PPI ( 0.2% vs. 0.0% est; prev. -0.3%) at 8:30 AM
    • PPI (-0.2% vs. 0.3% est.; prev. -0.6%) at 8:30 AM
    • Prelim UoM Consumer Sentiment ( 75.0 est.; prev. 89.1) at 10:00 AM
    • Prelim UoM Inflation Expectation ( prev. 2.2%) at 10:00 AM
    • Final Wholesale Inventories (-0.5% est.; prev. -0.5%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2760.75, 2729.52 and 2708.35
  • Critical resistance levels for S&P 500 are 2766.78, 2804.17 and 2825.60
  • Key levels for eMini futures: break above 2769.25, the high of 3:30 AM and break below 2701.25, the low of 8:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2738.50 and the index closed at 2749.98 – a spread of about -11.50 points; futures closed at 2735.00 for the day; the fair value is +3.50
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +24.50; Dow by +280 and NASDAQ by +51.25

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo was down
  • European markets are mostly higher – France and Switzerland are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • Cotton
    • NatGas
    • Copper
  • Bond
    • 10-yrs yield closed at 0.764%, up from April 7 close of 0.736%;
    • 30-years is at 1.364%, up from 1.332%
    • 2-years yield is at 0.256% down from 0.268%
    • The 10-Year-&-2-Year spread is at 0.508 up from 0.468
  • VIX
    • Is at 44.75 up +1.40 from April 8 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 green candle that opened higher and mostly traded up; almost no upper shadow and small lower shadow
    • forming an ABCD pattern; achieved 61.8% extension target near 2725.00; 100% extension target is near 2897.00
    • %K crossing above %D after falling below it for a day; above 80
    • RSI-9 turning up and rising in zig-zag move; near 60; 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)
  • Rising after retracing to a support level – the upper bound of a horizontal channel that broken to the upside;
    • 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 rising after falling to near 40 from 80; near 60
    • %K is below %D
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways since 2:30 PM on Wednesday
    • Near the upper bound of a horizontal channel between 2750.00 and 2620.75; a break above will have a 61.8% extension target near 2830.00; 100% extension target is near 2880.00
    • RSI-21 declined to 50 from above 65; moving between 40 and 65 since April 1
    • %K is crisscrossing %D below 20 since 5:00 AM
  • At/below 20-bar EMA but above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 9:45 PM on Tuesday
  • The Bollinger Band was relatively narrow till 3:30 AM; expanding with price walking down the lower band since 5:30 AM
  • Stochastic (9, 1, 3): %K is crisscrossing %D since 5:30 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, April 8 in lower volume.

Indices opened higher and then mostly traded higher during the day. Most are trying to break above a resistance level created by the down gap created on March 12.

All S&P sectors closed higher.

From Briefing.com:

The stock market rallied on Wednesday, though the advance found resistance near Tuesday’s opening high. The S&P 500 gained 3.4% while the Russell 2000 (+4.6%) outperformed.

[…]

All eleven sectors ended in the green with seven groups finishing ahead of the broader market. Real estate (+7.4%) and energy (+6.7%) outperformed throughout the day while utilities (+5.4%) and materials (+5.0%) ascended the leaderboard in late trade.

[…]

Treasuries ended the day in mixed fashion, as shorter tenors climbed while longer tenors retreated, sending the 10-yr yield higher by three basis points to 0.76%.

Crude oil jumped $1.39, or 5.9%, to $25.17/bbl, reclaiming a portion of its loss from yesterday even though the latest weekly inventory report showed another massive build.

Economic data released this morning was limited to the weekly MBA Mortgage Index, which fell 17.9% to follow last week’s 15.3% increase. The Purchase Index dropped 12.2% while the Refinance Index slumped 19.4%.

[…]
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