Morning Notes – Wednesday May 20, 2020

/ May 20, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with elevated volatility – watch for break below 2925.00 for change of fortune
  • No key economic data due:

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2922.35, 2913.86 and 2874.14
  • Critical resistance levels for S&P 500 are 2964.21, 2869.09 and 2985.93
  • Key levels for E-mini futures: break above 2953.50, the high of 2:30 PM on May 19 and break below 2947.00, the low of 7:15 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (June 2020) closed at 2916.25 and the index closed at 2922.94 – a spread of about -6.75 points; futures closed at 2918.75 for the day; the fair value is -2.50
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +33.75; Dow down by +283 and NASDAQ up by +99.00

Markets Around The World

  • Markets in the East closed mostly up – Shanghai and Singapore were down
  • European markets are mostly lower – Germany and STOXX 600 are down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
    • Silver
    • Coffee
  • Bond
    • 10-yrs yield is at 0.719%, up from May 19 close of 0.711%;
    • 30-years is at 1.443%, up from 1.435%
    • 2-years yield is at 0.173% up from 0.161%
    • The 10-Year-&-2-Year spread is at 0.546 down from 0.550
  • VIX
    • Is at 28.94; down -1.59 from May 19 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-On

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 red Harami candle with almost no lower and small upper shadow; near a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; turning down above 90
    • RSI-9 is just below 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)
  • Similar to that on Tuesday morning after a small decline to EMA20; Break above a Double Bottom pattern still relevant; 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 rising since 4:00 PM after falling to 40 from above 80 and making Bearish Divergence; near 65
    • %K is above %D;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting sideways since 11:30 A on Monday; broke above a downtrend line from May 19 high;
    • 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 rising since 6:00 PM from just below 40
    • %K is crisscrossing %D above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) drifting up since 9:30 PM
  • The Bollinger Band expanded from 4:15 AM to 8:15 AM; narrowing since
    • Stochastic (9, 1, 3): %K is below %D since 8:30 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed lower on Tuesday, May 19 in lower volume. Most indices made red Harami candle after opening lower. All S&P 500 sectors were in red.

From Briefing.com:

The S&P 500 pulled back 1.1% on Tuesday, as stocks succumbed to late-day selling following a negative-sounding vaccine headline. The Dow Jones Industrial Average (-1.6%) and Russell 2000 (-2.0%) declined more than the benchmark index, while the Nasdaq Composite (-0.5%) fared slightly better.

[…]

All 11 S&P 500 sectors finished in negative territory, most notably the financials (-2.5%) and energy (-2.9%) sectors. The consumer discretionary (-0.1%), information technology (-0.4%), and communication services (-0.4%) sectors gave up gains as selling accelerated into the close.

[…]

U.S. Treasuries ended the session with small gains. The 2-yr yield declined one basis point to 0.18%, and the 10-yr yield declined three basis points to 0.71%. The U.S. Dollar Index declined 0.1% to 99.55. WTI crude rose another 1.5%, or $0.48, to $32.30/bbl.

[…]

• Housing starts fell 30.2% m/m in April to a seasonally adjusted annual rate of 891,000 (Briefing.com consensus 950,000). Building permits were down 20.8% m/m to a seasonally adjusted annual rate of 1.074 million (Briefing.com consensus 1.000 mln).
o The key takeaway from the report is that while building permits exceeded expectations, permits for single-family dwellings decreased 24.3% m/m to 669,000, which points to a slowing market.

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