Morning Notes – Thursday April 30, 2020

/ April 30, 2020

Directional Bias For The Day:

  • S&P Futures are lower; moving down from 2965.00 at 0:15 AM to 2925.00 by 8:45 AM
  • The odds are for a down day with elevated volatility – watch for break above 2952.25 for change of fortune
  • Key economic data due:
    • Unemployment Claims ( 3839K vs. 3500K est.; prev.4442K) at 8:30 AM
    • Personal Spending (-7.5% vs. -4.8% est.; prev. 0.2%) at 8:30 AM
    • Core PCE Price Index ( -0.1% vs. -0.1% est.; prev. 0.2%) at 8:30 AM
    • Employment Cost Index ( 0.8% vs. 0.7% est.; prev. 0.7%) at 8:30 AM
    • Personal Income ( -2.0% vs., -1.6% est.; prev. 0.6% ) at 8:30 AM
    • Chicago PMI ( 38.0 est.; prev. 47.8) at 9:45 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2937.46, 2931.91 and 2912.16
  • Critical resistance levels for S&P 500 are 2954.71, 2978.18 and 2985.93
  • Key levels for eMini futures: break above 2952.75, the high of 4:30 AM and break below 2923.25, the low of 2:30 PM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P future (June 2020) closed at 2929.75 and the index closed at 2939.51 – a spread of about -9.75 points; futures closed at 2941.00 for the day; the fair value is -11.25
  • Pre-NYSE session open, futures are lower – at 8:15 AM, S&P 500 futures were down by -16.50; Dow by -166 and NASDAQ by -8.25

Markets Around The World

  • Markets in the East closed higher – Hong Kong and Seoul were closed for trading
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • Dollar index
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Copper
  • Bond
    • 10-yrs yield closed at 0.627%, up from April 28 close of 0.610%;
    • 30-years is at 1.245%, up from 1.206%
    • 2-years yield is at 0.203% up from 0.234%
    • The 10-Year-&-2-Year spread is at 0.424 up from 0.376
  • VIX
    • Is at 31.87 up +0.64 from April 29 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 to 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 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 that opened higher, above previous day’s red candle’s open, with almost no lower no lower shadow and small upper shadow; broke above a resistance; above 61.8% Fibonacci retracement of the 2020 decline; next resistance levels are at 2999.00 and 3136.72
    • %K is above %D; above 80
    • RSI-9 turning up; moving up in zig-zag manner; above 70; 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)
  • Up trending since March 23; sequence of higher highs and higher lows since April 21, the third since the uptrend started
    • broke above a horizontal channel – from March 11 to April 6 between 2650.00 and 2174.00; the 61.8% extension target near 2944.00 is achieved and 100% extension target is near 3126.00
    • RSI-21 declining since 4:00 PM on April 29 after making Bearish Divergence
    • %K is crisscrossing %D around 60
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Breaking below a Double Top pattern, with higher second top, the 100% extension target is near 2905.00, if completed;
    • an ABCD pattern is completed (A=2717.25, B=2836.75, C=2755.25); 161.8% extension target near 2948.00 is achieved
    • RSI-21 is moving down since 4:40 PM after making Bearish Divergences few times;
    • %K is below %D; below 20
  • Below EMA20 but at/above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways to down since 1:30 AM
  • The Bollinger Band expanded with price walking down the lower band
    • Stochastic (9, 1, 3): %K is below %D; below 20 at 7:00 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, April 29 in higher volume. The indices opened higher making day’s high and then then mostly traded higher. They are breaking above a resistance level created by the down gap created on March 9. All but two S&P sectors – Consumer Staples and Utilities – closed higher.

From Briefing.com:

The S&P 500 climbed 2.7% on Wednesday, primarily driven by positive remdesivir news and aided by better-than-feared earnings reports and a market-friendly reminder from the Fed. The Nasdaq Composite rose 3.6%, the Dow Jones Industrial Average rose 2.2%, and the Russell 2000 rose 4.8%.

[…]

The ensuing advance in stocks was paced by the S&P 500 energy (+7.4%), communication services (+5.1%), and information technology (+4.2%) sectors, while the defensive-oriented consumer staples (-0.4%) and utilities (-0.9%) sectors were left out of the rally.

[…]

U.S. Treasuries were relatively unchanged throughout the session, as bond investors were unfazed by the equity rally given the weak GDP data and precarious economic environment. The 2-yr yield declined one basis point to 0.19%, while the 10-yr yield increased two basis points to 0.63%. The U.S. Dollar Index declined 0.3% to 99.53.

[…]

• First quarter GDP declined at an annualized rate of 4.8% (Briefing.com consensus -4.3%) while the GDP Price Deflator was 1.3% (Briefing.com consensus 1.1%). This was the largest decline in GDP since the fourth quarter of 2008.
o The key takeaway from the report is that it hints at how ugly the Advance Q2 GDP report will be given that shutdown measures in the U.S. didn’t start to gain steam until the latter half of March.
• Pending Home Sales dropped 20.8% in March after increasing a revised 2.3% in February (from +2.4%).
• The weekly Mortgage Applications Index declined 3.3% following a 0.3% decline in the prior week.

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