Market Remarks

Morning Notes – Monday April 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 1:00 AM on Friday from 2755.25 and after making a Bullish Divergence on 15-minute chart
  • A symmetrical triangle is emerging on 15-minutes chart; a break below it will be short term bearish
  • The odds are for an up day – watch for break below 2842.25 for change of fortune
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2842.71, 2717.80 and 2791.76
  • Critical resistance levels for S&P 500 are 2869.98, 2879.22 and 2901.54
  • Key levels for eMini futures: break above 2865.00, the high of 1:30 AM break below 2842.25, the low of 3:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P future (June 2020) closed at 2828.00 and the index closed at 2836.74 – a spread of about -8.75 points; futures closed at 2829.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +27.50; Dow by +235 and NASDAQ by +102.00

Markets Around The World

  • Markets in the East closed up
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Sugar
    • Cotton
  • Bond
    • 10-yrs yield is at 0.627%, up from April 24 close of 0.596%;
    • 30-years is at 1.204%, up from 1.177%
    • 2-years yield is at 0.220% down from 0.224%
    • The 10-Year-&-2-Year spread is at 0.385 down from 0.379
  • VIX
    • Is at 35.33 down -0.60 from April 24 close; below 5-day SMA;
    • Down from all time high of 85.47 on March 18; recent high 47.77 on April 21, recent low 37.31 on April 14
    • Risk-On

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 24 was a long-legged Doji (with small upper shadow);
    • Stochastic (9,1, 3): %K is above %D above 50
    • RSI (9) is moving higher; near 50
  • Last week was down -37.82 or -1.3%; the 5-week ATR is 254.90
  • Last week’s pivot point=2810.94, R1=2894.78, R2=2952.82; S1=2752.90, S2=2669.06; S1 pivot level was breached
  • A down week; second 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 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 relatively small green candle with almost no upper shadow and small lower shadow
    • 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 above %D;
    • RSI-9 turning up; moving up in zig-zag manner; above 50; above 8-day RSI;
  • Above 20-day EMA, 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (e-mini future)
  • Moving along below the uptrend line from March 23 that was broken on April 21; rising in steps since April 2;
    • 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; new sequence of higher high and lower highs since April 21
    • RSI-21 moving up after declining to 35 at 8:00 PM on April 23; above 70;
    • %K is crisscrossing %D
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 8:00 PM on April 21; second leg since 1:00 AM on on April 24;
    • ABCD (A=2717.25, B=2836.75, C=2755.25); 100% extension target for D is near 2874.00 and 161.8% extension target is near 2948.00
    • RSI-21 is moving along 6 since 2:00 AM;
    • %K is crisscrossing %D
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • A symmetrical triangle emerging since 11:30 PM
  • Bollinger Band (20, 2.0) moving up since 2:30 AM on Friday
  • The Bollinger Band narrowing since 3:15 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D; above 80
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Friday, April 24 in mostly lower volume. Dow Jones Transportation traded lower in lower volume.

For the week, major U.S. indices mostly closed lower in lower volume. Russell 2000 closed up for the week. Indices made lows early in the week and then traded higher. Most made long lower shadow and small upper shadows. Few made Doji like candle and few closed above their open.

Only two S&P sectors – Energy and Telecom – closed up for the week. Most international exchanged closed lower for the week, Switzerland was up. Most commodities were down but Gold was up. U.S. Treasuries rallied and yields dropped.

From Briefing.com:

The S&P 500 increased 1.4% on Friday, wrapping up a negative week on a positive note amid a resurgence in buyers during the afternoon. The Dow Jones Industrial Average rose 1.1%, the Nasdaq Composite rose 1.7%, and the Russell 2000 rose 1.6%.

[…]

The information technology sector (+2.1%) led the advance, followed by the materials sector (+1.6%). The energy sector (+0.2%) underperformed today.

[…]

U.S. Treasuries ended the session with modest gains, pushing yields slightly lower. The 2-yr yield and 10-yr yield both declined two basis points each to 0.20% and 0.60%, respectively. The U.S. Dollar Index declined 0.2% to 100.24. On a related note, the Fed will reduce its Treasury purchases to $10 billion/day next week from $15 billion/day this week.

[…]

• Durable goods orders declined 14.4% m/m in March (Briefing.com consensus -10.0%). Excluding transportation, durable goods orders declined 0.2% (Briefing.com consensus -4.0%).
o The key takeaway from the report is that business spending was up slightly in March, yet that condition isn’t expected to persist into April when COVID-19 shutdown measures hit in full force and corporate capex cut announcements accelerated.
• The final reading for the University of Michigan Index of Consumer Sentiment for March was revised up to 71.8 (Briefing.com consensus 66.5) from the preliminary reading of 71.0. The final reading for March was 89.1.
o The key takeaway from the report is that the downturn in the Expectations Index has not been as severe as the downturn in the Current Economic Conditions Index, which suggests consumers are clearly concerned about the outlook but still clinging to some rebound hope with anticipated reopenings of state economies.

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