Market Remarks

Morning Notes – Thursday April 16, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; declining since making a high of 2806.25 of 2:30 AM to near 2775.00
  • The odds are for a down to sideways day with elevated volatility – watch for break above 2794.75 for change of fortune
  • Key economic data due:
    • Unemployment Claims ( 5350K est.; prev. 6606K) at 8:30 AM
    • Building Permits (  1.30M est.; prev. 1.45M) at 8:30 AM
    • Philly Fed Manufacturing Index ( -30.0 est.; prev. -12.7) at 8:30 AM
    • Housing Starts ( 1.31M est.; prev. 1.60M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2777.41, 2763.46 and 2731.94
  • Critical resistance levels for S&P 500 are 2801.88, 2805.10 and 2832.60
  • Key levels for eMini futures: break above 2806.25, the high of 2:30 AM and break below 2782.50, the low of 5:30 PM on Monday

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2775.00 and the index closed at 2783.36 – a spread of about -8.25 points; futures closed at 2775.00 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures are higher – at 8:00 AM, S&P 500 futures were up by +7.75; Dow by +28 and NASDAQ by +51.50

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Mumbai and Singapore closed higher; Hong Kong, Tokyo, Sydney and Seoul closed lower
  • European markets are mostly higher – Spain is down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cocoa
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield closed at 0.638%, down from April 14 close of 0.752%;
    • 30-years is at 1.275%, down from 1.412%
    • 2-years yield is at 0.211% down from 0.215%
    • The 10-Year-&-2-Year spread is at 0.427 down from 0.537
  • VIX
    • Is at 41.36 up +0.52 from April 15 close; above 5-day SMA;
    • Down from all time high of 85.47 on March 18
    • Risk-neutral

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 candle that gapped down at the open with very small upper shadow and lower shadow almost double the size of small real body; three-day Evening Star pattern
    • 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; below 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (e-mini future)
  • Rising in steps since April 2;
    • declined from high near 2845.00 at 4:00 PM on April 14 to 50-bar EMA
    • 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 from 30 after making Bullish Divergence at 4:00 PM; just above 50; Bearish Divergence on April 8 and April 9;
    • %K is above %D; near 80
  • At/above 20-bar EMA; at/above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways since 4:30 AM on Wednesday;
    • moving within an upsloping trading channel since April 8; bouncing from near its lower bound during Asian session
    • sustained break above 2792.75 will complete a Double Bottom pattern; 38.2% extension target will be near 2808.00, 61.8% extension target near 2821.00 and 100% extension target near 2834.25
    • Broke above a horizontal channel between 2750.00 and 2620.75 on April 9; 61.8% extension target near 2830.00 is achieved; 100% extension target is near 2880.00
    • RSI-21 rising since 8:30 PM from near 30 after making a Bullish Divergence; just above 50;
    • %K is below %D from above 90 since 1:30 AM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 0:30 AM; flattening since 6:00 AM
  • The Bollinger Band was relatively narrow from 11:00 PM to 1:00 AM; expanding since with price walking up the upper band till 2:45 AM; falling back to middle band since then
  • Stochastic (9, 1, 3): %K is crisscrossing %D higher
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Wednesday, April 15 in mostly lower volume. Dow Jones Transportation Average traded in higher volume. Market indices gapped down at the open and most made three-day evening star pattern. All S&P sectors closed lower. Most international exchanges also closed down.

From Briefing.com:

The S&P 500 declined 2.2% on Wednesday, as the release of historically weak economic data undercut risk sentiment. The Dow Jones Industrial Average lost 1.9%, the Nasdaq Composite lost 1.4% to snap a four-session winning streak, and the Russell 2000 underperformed with a 4.3% decline.

[…]

The plethora of reminders that economic conditions are woeful contributed to losses in all 11 S&P 500 sectors, but the S&P 500 remarkably still finished above Monday’s closing level. The financials sector (-4.3%) was an influential laggard following earnings reports from Bank of America (BAC 22.19, -1.54, -6.5%), Citigroup (C 42.86, -2.56, -5.6%), and Goldman Sachs (GS 178.52, +0.29, +0.2%).

The energy sector (-4.7%) declined the most, though, as the group remained pressured by lower oil prices after the EIA projected a 9.2 mb/d decline in oil demand in 2020. WTI crude futures settled just below $20.00/bbl, losing 1.3%, or $0.27, to $19.95/bbl.

[…]

Longer-dated U.S. Treasuries exhibited strength in a textbook trade given the negative economic data and decline in stocks. The 2-yr yield declined two basis points to 0.20%, and the 10-yr yield declined 11 basis points to 0.64%. The U.S. Dollar Index increased 0.7% to 99.57.

[…]

• Retail sales declined 8.7% m/m in March (Briefing.com consensus -10.0%) following an upwardly revised 0.4% decline (from -0.5%) in February. Excluding autos, sales declined 4.5% (Briefing.com consensus -7.6%) following an unrevised 0.4% decline in February.
o The key takeaway from the report is that it captured the impact of the COVID-19 shutdown situation, as spending in discretionary categories cratered while spending for essential items accelerated in a big way.
• Industrial production declined 5.4% m/m in March (Briefing.com consensus -3.3%) following a downwardly revised 0.5% increase (from 0.6%) in February. Total capacity utilization was 72.7% (Briefing.com consensus 74.1%) following an unrevised 77.0% in February.
o The key takeaway from the report is that it captures the severity of the shutdown situation, best reflected in the pronouncement that the downturn in industrial production was the worst since 1946.
• The New York Fed’s Empire State Manufacturing Survey plummeted 57 points to -78.2 (Briefing.com consensus -32.0).
• The NAHB Housing Market Index for April plunged to 30 (Briefing.com consensus 57) from 72 in March.
• Business inventories decreased 0.4% in February, as expected, while the January reading was revised down to -0.3% from -0.1%.
• The Mortgage Bankers Applications Index increased 7.3% week-over-week.

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