Market Remarks

Morning Notes – Thursday April 23, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are little changed; mostly moving sideways since 1:30 PM on Wednesday with a 30-point range
  • The odds are for a sideways to down day with elevated volatility – watch for break above 2805.75 and break below 2773.00 for clarity
  • Key economic data due:
    • Unemployment Claims (4427K vs. 4350K est.; prev. 5245K) at 8:30 AM
    • Flash Manufacturing PMI ( 35.1 est.; prev. 48.5) at 9:45 AM
    • Flash Services PMI ( 0.5 est.; prev. 39.8) at 9:45 AM
    • New Home Sales (643K est.; prev. 765K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2788.99, 2779.61 and 2762.10
  • Critical resistance levels for S&P 500 are 2815.10, 2820.43 and 2836.42
  • Key levels for eMini futures: break above 2805.75, the high of 2:30 AM and break below 2773.00, the low of 7:30 PM

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2789.00 and the index closed at 2799.31 – a spread of about -10.25 points; futures closed at 2788.50 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are down to flat – at 6:45 AM, S&P 500 futures were down by -1.00; Dow by -41 and NASDAQ by -7.50

Markets Around The World

  • Markets in the East closed mostly mixed – Hong Kong, Tokyo, Mumbai and Seoul closed up; Shanghai, Sydney and Singapore closed down
  • European markets are mixed – Germany, U.K. and Switzerland are lower; France, Spain, Italy and STOXX 600 are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/JPY
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • NatGas
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.619%, up from April 21 close of 0.571%;
    • 30-years is at 1.220%, up from 1.162%
    • 2-years yield is at 0.217% up from 0.205%
    • The 10-Year-&-2-Year spread is at 0.402 up from 0.366
  • VIX
    • Is at 41.51 down -0.47 from April 22 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 17 was a green candle with almost no upper shadow and lower shadow that was two-third of the real body;
    • Stochastic (9,1, 3): %K is above %D above 50
    • RSI (9) is moving higher; near 50
  • Last week was up +84.74 or +3.0%; the 5-week ATR is 311.50
  • Last week’s pivot point=2824.98, R1=2928.80, R2=2983.03; S1=2770.75, S2=2666.93; No pivot levels were breached
  • An up week; third in last five weeks and fifth 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
  • Above 10-week EMA; below 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A small green spinning top candle that opened higher and then mostly traded up during the day
    • forming an ABCD pattern (A on March 23, B on March31 and C on April 2); achieved 61.8% extension target near 2725.00; 100% extension target is near 2897.00
    • %K is below %D but turning up above 50; Bearish Divergence on April 17
    • RSI-9 turning up; moving up in zig-zag manner; just above 50; below 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; broke above resistance level of 2846.00 on April 16 but is now below it; broke below an uptrend line from April 2; bouncing since 2:00 PM on April 21 to the broken uptrend line
    • 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
    • Sequence of higher highs & higher lows since 10:00 AM on March 23 is broken
    • RSI-21 moving above 50 since 4:00 AM on Wednesday; near 60; Bullish Divergence at 8:00 PM on Tuesday
    • %K is crisscrossing %D lower
  • At/below 20-bar EMA; at/below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Trading within a horizontal channel since 3:30 PM between 2808.00 and 2772.75; a 61.8% up-break target is near 2829.00 and the down-break target is near 2750.00
    • Broke above a Double Bottom chart pattern at 4:00 AM on Wednesday; achieved the 100% extension target near 2790.00 and approached the 161.8% extension target is near 2812.00;
    • RSI-21 moving between 50 and 65 since 1:30 AM on April 22; Bullish Divergence at 8:00 PM on April 21
    • %K is below %D since 6:00 AM
  • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to up since 3:45 PM on Wednesday
  • The Bollinger Band narrowed from 9:15 PM to 1:15 AM; expanding since; price near the middle band
    • Stochastic (9, 1, 3): %K is below %D; below 30
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, April 22 in mostly lower volume. Dow Jones Transportation traded lower in higher volume.

Indices opened higher and then mostly drifted higher closing near the high for the day. They still did not close the down-gap made on April 21. All eleven S&P sectors closed higher for the day.

From Briefing.com:

The S&P 500 advanced 2.3% on Wednesday, recouping some of its weekly decline, as sentiment benefited from a reprieve in the oil futures market and more stimulus action. The Nasdaq Composite outperformed with a 2.8% gain, followed by the Dow Jones Industrial Average (+2.0%) and Russell 2000 (+1.3%).

[…]

The advance was steady and broad-based, with all 11 S&P 500 sectors closing in positive territory. The information technology sector (+3.9%) leaped ahead amid strength in the semiconductor stocks, which rallied around a positive earnings report from Texas Instruments (TXN 111.98, +5.14, +4.8%). The consumer staples sector (+1.1%) underperformed.

[…]

U.S. Treasuries finished on a lower note with longer-dated maturities backtracking from their recent advance. The 2-yr yield increased one basis point to 0.21%, and the 10-yr yield increased five basis points to 0.62%. The U.S. Dollar Index increased 0.1% to 100.40.

[…]

• The FHFA Housing Price Index for April rose 0.7% after increasing an upwardly revised 0.5% in March (from +0.3%).
• The weekly MBA Mortgage Applications Index declined 0.3% following a 7.3% increase in the prior week.

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