Market Remarks

Morning Notes – Monday May 11, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 9:30 PM on Sunday
  • The odds are for a down day with good chance of sideways to up move from pre-open levels around 2895.00, with elevated volatility – watch for break below 2889.25 and break above 2911.25  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-Side
  • 15-Min: Up-Down
  • 6-Min: Down

Key Levels:

  • Critical support levels for S&P 500 are 2902.88, 2876.67 and 2847.65
  • Critical resistance levels for S&P 500 are 2912.44, 2932.16 and 2954.86
  • Key levels for E-mini futures: break above 2911.75, the high of 7:00 AM and break below 2889.75, the low of 8:30 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (June 2020) closed at 2921.50 and the index closed at 2929.80 – a spread of about -8.25 points; futures closed at 2928.50 for the day; the fair value is -7.00
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -33.00; Dow by -294 and NASDAQ by -50.00

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Mumbai and Seoul closed down; Hong Kong, Tokyo, Sydney and Singapore closed up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Copper
    • Platinum
    • Palladium
    • Sugar (Unch.)
  • Bond
    • 10-yrs yield is at 0.680%, down from May 8 close of 0.682%;
    • 30-years is at 1.390%, up from 1.386%
    • 2-years yield is at 0.157% down from 0.161%
    • The 10-Year-&-2-Year spread is at 0.523 up from 0.521
  • VIX
    • Is at 29.97; up +1.99 from May 8 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 30.54 on April 28
    • Sentiment: Risk-Off

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend under pressure
  • April 2020 was a large green candle with small upper and lower shadows; index advanced +12.7% following a decline of 12.5% in March;
    • Stochastic %K is crossing above %D and near 60; %K Bearish Divergence in January
    • RSI-9 turning up after declining to 34.91, the lowest level since April 2009, from above 75 in January and ; Bearish Divergence
    • Regaining the lower band of the 120-month regression channel to middle of the band; only third break below since 2009 but first close below it
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on May 8 was a Bullish Engulfing candle with almost no upper shadow and small lower shadow;
    • Stochastic (9,1, 3): %K is above %D above 90
    • RSI (9) is turning up; above 50
  • The week was up +99.09 or +3.5%; the 5-week ATR is 180.60
  • The weekly week pivot point =2886.60, R1=2975.36, R2=3020.91; S1=2841.05, S2=2752.29; R1 pivot level was 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 green candle that gapped up at the open with small lower shadow and almost no upper shadow;
    • %K is above %D;
    • RSI-9 above 60; moving between 50 and 65 since April 6; above 8-day RSI;
  • Above 20-day EMA; above 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (E-mini futures)
  • Moving up since 8:00 PM on May 3; just below the high of April 30; sequence of higher highs and higher lows since May 3, the fourth such sequence since the uptrend started; broke below a shallower uptrend line from March 23 lows
    • RSI-21 declining since 8:00 PM on Sunday from above 75 to near 45
    • %K is below %D; below 20
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Declining since 9:30 PM from 2947.00 to 2890.25 near a support
    • RSI-21 turning up below 40 after declining from above 65
    • %K is above %D below 10
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) trending down since 4:00 AM
  • The Bollinger Band expanding since 4:00 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D near 30
  • Bias: Up-Down

Previous Session

Major U.S. indices closed higher on Friday, May 8 in mixed volume. Dow Jones Industrial Average, Dow Jones Transportation Average and NASDAQ Composite traded in lower volume.

For the week, Major U.S. indices closed higher in lower volume. All S&P sectors were up. Asia was mixed – Shanghai, Tokyo, Sydney were up and Honk Kong, Mumbai, Seoul and Singapore were down. Europe was mixed too – Germany, U.K., Switzerland and STOXX 600 were up and France, Spain and Italy were down. Dollar and Yen were up. Crude Oil, Gold, Copper and most commodities were up. Treasuries declined for the week.

From Briefing.com:

U.S. stocks extended weekly gains on Friday, as the market saw reasons to stay positive on the economic outlook despite the dismal employment report for April. The S&P 500 (+1.7%), Dow Jones Industrial Average (+1.9%), and Nasdaq Composite (+1.6%) advanced more than 1.5%, while the Russell 2000 rose 3.6%.

The gains were broad, with all 11 S&P 500 sectors and all 30 Dow components closing in positive territory. Relative strength was found in the S&P 500 energy (+4.3%), industrials (+2.5%), materials (+2.4%), and consumer staples (+2.3%) sectors, while stocks in the health care sector (+0.5%) underperformed.

[…]

U.S. Treasuries retreated throughout the day and closed near their session lows. The 2-yr yield increased three basis points to 0.14%, and the 10-yr yield increased five basis points to 0.68%. The U.S. Dollar Index declined 0.1% to 99.78. WTI crude futures rose 4.5%, or $1.06, to $24.71/bbl.

[…]

• April nonfarm payrolls declined by 20.5 million (Briefing.com consensus -21.00 million). April private sector payrolls declined by 19.52 million (Briefing.com consensus -21.30 million). April unemployment rate was 14.7% (Briefing.com consensus 16.2%), versus 4.4% in March. April average hourly earnings were up 4.7% (Briefing.com consensus +0.4%) after increasing an upwardly revised 0.5% (from 0.4%) in March.
o The key takeaway from the report is that there is a lot more to it than meets the headline eye, most of which speaks to the depth of the country’s economic problems and the challenges in bouncing back from them in rapid-fire fashion.
• Wholesale inventories declined 0.8% in March (Briefing.com consensus -1.0%) after declining 0.7% in February.

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