Morning Notes – Tuesday April 14, 2020

/ April 14, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up to sideways day with elevated volatility – watch for break below 2752.00 for change of fortune
    • A symmetrical triangle is emerging on 30-minute chart indicating indecision; break up or down will provide clarity
  • Key economic data due:
    • Earning season starts this week
    • Import Prices (  -3.1% est.; prev. -0.5%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2770.20, 2731.94 and 2721.17
  • Critical resistance levels for S&P 500 are 2795.73, 2818.57 and 2825.60
  • Key levels for eMini futures: break above 2807.00, the high of 0:00 AM and break below 2752.50, the low of 8:30 PM

Pre-Open

  • On Monday at 4:00 PM, S&P future (June 2020) closed at 2753.00 and the index closed at 2761.63 – a spread of about -8.75 points; futures closed at 2759.25 for the day; the fair value is -6.25
  • Pre-NYSE session open, futures are higher – at 6:45 AM, S&P 500 futures were up by +24.50; Dow by +257 and NASDAQ by +104.25

Markets Around The World

  • Markets in the East closed higher – Mumbai was closed
  • European markets are mostly higher – U.K. and France are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cocoa
    • Crude Oil
    • NatGas
    • Gold
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield closed at 0.749%, up from April 9 close of 0.729%;
    • 30-years is at 1.381%, up from 1.391%
    • 2-years yield is at 0.243% up from 0.220%
    • The 10-Year-&-2-Year spread is at 0.506 down from 0.509
  • VIX
    • Is at 40.28 down -0.89 from April 13 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 10 was a large green candle that opened higher for the week almost no lower shadow and small upper shadows
    • Stochastic (9,1, 3): %K is above %D near40
    • RSI (9) is moving higher; near 45
  • Last week was up +301.17 or +12.1%; the 5-week ATR is 378.60
  • Last week’s pivot point=2727.65, R1=2880.74, R2=2971.65; S1=2636.74, S2=2483.65; R1/R2/R3 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 2193.81, the high 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 Hanging Man candle; three-day Evening Star pattern forming; break below Monday’s low will have bearish implications;
    • forming an ABCD pattern; achieved 61.8% extension target near 2725.00; 100% extension target is near 2897.00
    • %K is crossing below %D above 90
    • RSI-9 moving up in zig-zag manner; just below 60; above 8-day RSI;
  • Above 20-day EMA; at/below 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Rising in steps since April 2;
    • the 61.8% extension target near 2750.00 of the previously broken horizontal 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 just above 60; moving between 40 and 65 since 10:00 AM on April 7; Bearish Divergence on April 8 and April 9;
    • %K is below %D; near 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways to up since 6:30 PM on Sunday; near the upper range of a trading range at around 2780.00-2790.00
    • A symmetrical triangle is emerging at the top
    • Bouncing after testing the support of the upper bound of a horizontal channel between 2750.00 and 2620.75 that was broken to the upside on April 9; 61.8% extension target is near 2830.00 and 100% extension target is near 2880.00
    • RSI-21 declining from above 65; moving between 40 and 65 since April 1
    • %K is crisscrossing %D near 40
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Emerging down-sloping flag with a pole height of about 50 points; 100% extension target is near 2830.00 level
  • Bollinger Band (20, 2.0) moving sideways to down since 2:45 AM
  • The Bollinger Band is relatively narrow
  • Stochastic (9, 1, 3): %K is below %D since 6:30 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed lower on Monday, April 13 in lower volume. The European markets were closed due to Easter Monday. All S&P sectors except Technology closed lower.

The markets are choppy with lot of volatility. Most U.S. major indices are forming three day evening star pattern. NASDAQ Composite is exception. A break below Monday’s lows will complete the pattern but a break above Monday’s high will nullify the pattern.

From Briefing.com:

The S&P 500 declined 1.0% on Monday in a slight reversal from last week’s rally, while relative strength in the technology stocks helped lift the Nasdaq Composite (+0.5%). The Dow Jones Industrial Average fell 1.4%, and the Russell 2000 fell 2.8%.

[…]

The S&P 500 real estate sector (-4.6%) declined the most, while the consumer discretionary sector (+1.1%) finished comfortably in positive territory.

[…]

WTI crude futures struggled for direction and ultimately settled the session down 2.0%, or $0.45, to $22.42/bbl, suggesting that investors were not convinced that the production cuts alone would save an industry still facing demand problems caused by COVID-19.

[…]

U.S. Treasuries ended the quiet session on a lower note. The 2-yr yield increased one basis point to 0.23%, and the 10-yr yield increased two basis points to 0.75%. The U.S. Dollar Index declined 0.1% to 99.42.

[…]
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