Morning Notes – Tuesday May 19, 2020

/ May 19, 2020

Directional Bias For The Day:

  • S&P Futures are mixed;
  • The odds are for a sideways day elevated volatility – watch for break above 2948.00 and break 2930.75 for more clarity
  • A symmetrical triangle – flag – is appearing on 6-minute chart
  • Key economic data due:
    • Building Permits (1.07M vs. 1.00M est.; prev. 1.36M) at 8:30 AM
    • Housing Starts ( 0.89M vs. 0.95M est.; prev. 1.28M) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2947.57, 2931.32 and 2913.86
  • Critical resistance levels for S&P 500 are 2952.65, 2869.09 and 2985.93
  • Key levels for E-mini futures: break above 2976.25, the high of 2:30 AM on May 18 and break below 2930.75, the low of 6:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (June 2020) closed at 2946.25 and the index closed at 2953.91 – a spread of about -7.50 points; futures closed at 2948.00 for the day; the fair value is -1.75
  • Pre-NYSE session open, futures are mixed – at 8:30 AM, S&P 500 futures were down by -8.50; Dow down by -46 and NASDAQ up by +4.75

Markets Around The World

  • Markets in the East closed up
  • European markets are mostly lower – Switzerland is up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
    • Cocoa
    • Sugar
    • Coffee
  • Bond
    • 10-yrs yield is at 0.736%, down from May 18 close of 0.744%;
    • 30-years is at 1.452%, down from 1.458%
    • 2-years yield is at 0.181% up from 0.173%
    • The 10-Year-&-2-Year spread is at 0.555 down from 0.571
  • VIX
    • Is at 29.56; up +0.22 from May 18 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-Neutral

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 15 was a red Harami candle with lower shadow double the size of the real body and upper shadow half of it; an indecisive candle with more upward bias than downward
    • Stochastic (9,1, 3): %K is above %D; turning down from above 90
    • RSI (9) is turning down; from just below 50
  • The week was down -66.10 or -2.3%; the 5-week ATR is 150.45
  • The weekly week pivot point =2858.72, R1=2950.80, R2=3037.90; S1=2771.62, S2=2679.54; S1 pivot level was breached
  • A down week; third 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; at/below 89-week SMA
  • In Correction
Daily
  • A green candle that gapped up at the open with no lower and small upper shadow; breaking above a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; above 90
    • RSI-9 is above 60; above 8-day RSI;
  • Above 20-day EMA and 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (E-mini futures)
  • Broke above a Double Bottom pattern; at the upper bound of a Horizontal Channel; 61.8% extension target of the DB pattern is near 3055 and 100% extension target is near 3123.00
    • RSI-21 declining 10:00 AM on Monday; Bearish Divergence at 2:00 AM
    • %K is crisscrossing %D lower; below 20
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting down since 2:30 AM;
    • Broke above an uneven Inverse Head-&-Shoulder pattern at 6:30 PM on Sunday; 100% extension target, near 2979.00, was almost achieved
    • RSI-21 is declining since 11:00 AM on Monday; Bearish Divergence at 2:30 AM; near 50 from above 75
    • %K is crisscrossing %D up
  • At/below EMA20; above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down 1:30 PM on Monday;
  • The Bollinger Band expanded from 2:15 AM to 8:15 AM; narrowing since
    • Stochastic (9, 1, 3): %K is crisscrossing %D around 50
    • Uneven Head-&-Shoulder pattern is emerging; break below 2930.75 will complete the pattern with 61.8% extension target near 2902.00
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Monday, May 18 in mixed volume. Dow Jones Industrial Average and NASDAQ Composite traded in lower volume. Indices gapped up at the open and then traded higher. Most are near or breaking above a resistance.

From Briefing.com:

The S&P 500 rallied 3.2% on Monday, as reopening hopes were fueled by a positive vaccine update from Moderna (MRNA 80.00, +13.31, +20.0%). The small-cap Russell 2000 outperformed with a 6.1% gain, followed by the Dow Jones Industrial Average (+3.9%) and Nasdaq Composite (+2.4%).

[…]

All 11 S&P 500 sectors finished higher, including leadership from the energy (+7.6%), industrials (+6.6%), and financials (+5.3%) sectors. Oil prices climbed 8.3%, or $2.44, to $31.82/bbl. Treasuries sold off, driving yields higher in a curve-steepening trade. The CBOE Volatility Index declined 8.0% to 29.33.

[…]

As mentioned, Treasury yields increased as safe-haven demand waned amid today’s bullish mindset. The 2-yr yield increased four basis points to 0.19%, and the 10-yr yield increased ten basis points to 0.74%. The U.S. Dollar Index declined 0.8% to 99.60.

Monday’s economic data was limited to the NAHB Housing Market Index for May, which increased to 37 (Briefing.com consensus 34) from 30 in April.

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