Market Remarks

Morning Notes – Friday April 17, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; sideways to down 6:00 PM after gapping up more than 30 points from 5:00 PM close;
  • The odds are for an up day with elevated volatility – watch for break below 2831.00 for change of sentiments
  • Key economic data due:
    • CB Leading Index ( -7.1% est.; prev. 0.1%) at 10:00 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: Side

Key Levels:

  • Critical support levels for S&P 500 are 2851.85, 2832.60 and 2806.51
  • Critical resistance levels for S&P 500 are 2881.92, 2901.54 and 2929.57
  • Key levels for eMini futures: break above 2877.25, the high of 7:00 AM and break below 2831.50, the low of 4:30 PM on Thursday

Pre-Open

  • On Thursday at 4:00 PM, S&P future (June 2020) closed at 2788.75 and the index closed at 2799.55 – a spread of about -10.75 points; futures closed at 2787.50 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +84.25; Dow by +794 and NASDAQ by +195.00

Markets Around The World

  • Markets in the East closed up
  • European markets are higher
  • Currencies:
    Up Down
    • USD/CHF
    • NZD/USD
    • USD/CAD
    • Dollar index
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Platinum
  • Bond
    • 10-yrs yield closed at 0.609%, down from April 14 close of 0.638%;
    • 30-years is at 1.210%, down from 1.275%
    • 2-years yield is at 0.219% up from 0.211%
    • The 10-Year-&-2-Year spread is at 0.390 down from 0.427
  • VIX
    • Is at 38.31 down -1.80 from April 16 close; below 5-day SMA;
    • Down from all time high of 85.47 on March 18
    • Risk-off

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 doji candle that is mostly sideways from previous day’s candle; very small upper shadow and lower shadow almost double the size of small real body;
    • 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; gapped up at 6:00 PM on Thursday; broke above resistance level of 2846.00 but below another at 2884.75
    • bouncing off 50-bar EMA on Thursday
    • broke above a 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 retreating from above 70 to 65
    • %K is above %D; near 80
  • Above 20-bar EMA; above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways since 6:00 PM on Thursday;
    • moving within an upsloping trading channel since April 8; near its upper bound
    • 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 is above 50 but declining slightly
    • %K is below %D since 6:30 AM
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to down since 10:45 PM; flattening since 6:00 AM
  • The Bollinger Band is relatively stable but large since 2:00 AM
  • Stochastic (9, 1, 3): %K is below %D since 6:45 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mixed on Thursday, April 16 in mostly higher volume. Russell 2000, Dow Jones Transportation Average and NYSE Composite were down. Transports traded in lower volume. The price action was muted and NASDAQ was the best performing index with an emerging Morning Star formation.

From Briefing.com:

The stock market closed mixed on Thursday, as investors responded to another round of weak economic data by continuing to buy shares of technology companies while avoiding distressed sectors like financials and energy. The Nasdaq Composite rose 1.7%, while the S&P 500 (+0.6%) and Dow Jones Industrial Average (+0.1%) posted smaller gains. The Russell 2000 declined 0.5%.

[…]

These gains contributed the outperformance of the S&P 500 consumer discretionary (+1.9%) and information technology (+1.2%) sectors. The health care sector (+2.2%), though, advanced the most. […]

.[…]

Laggards were found in areas that have underperformed this year, specifically the energy (-4.0%), financials (-1.7%), and industrials (-0.8%) sectors.

[…]

U.S. Treasuries continued to show relative strength, pushing yields lower across the curve. The 2-yr yield declined one basis point to 0.19%, and the 10-yr yield declined three basis points to 0.61%. The U.S. Dollar Index increased 0.6% to 100.06. WTI crude declined 0.3% to $19.89/bbl.

[…]

• Initial claims for the week ending April 11 were “only” 5.245 million (Briefing.com consensus 5.000 million), down 1.37 million from the prior week. Continuing claims for the week ending April 4, meanwhile, were 11.976 million, up 4.53 million from the prior week.
o The key takeaway from the report is that the labor market is wrecked right now; and gainful employment with gainful income, which is missing for so many, is what is needed to drive an economy that relies heavily on consumer spending.
• Housing starts declined 22.3% m/m in March to a seasonally adjusted annual rate of 1.216 million (Briefing.com consensus 1.300 million). Building permits were down 6.8% m/m to a seasonally adjusted annual rate of 1.353 million (Briefing.com consensus 1.297 million).
o Building permits were better than expected because of increases for multi-unit dwellings, yet the key takeaway for this leading indicator is that permits for single-unit housing were down between 6.4% and 20.2% across all regions.
• The Philadelphia Fed Index for April plunged to -56.6 (lowest since July 1980) from -12.7 in March.

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