Morning Notes – Thursday May 21, 2020

/ May 21, 2020

Directional Bias For The Day:

  • S&P Futures are lower; moving up since 6:00 AM from 2943.40 to above 2960.00
  • The odds are for a sideways to an up day with elevated volatility – watch for break below 2941.50 for change of fortune
  • Key economic data due:
    • Unemployment Claims (438K vs. 2400K est.; prev. 2981K) at 8:30 AM
    • Philly Fed Manufacturing PMI ( -43.1 vs. -40.0 est.; prev. 56.6) at 8:30 AM
    • Flash Manufacturing PMI ( 39.3 est.; prev. 36.1) at 9:45 AM
    • Flash Service PMI ( 32.6 est.; prev. 26.7) at 9:45 AM
    • CB Leading Index (-5.1% est.; -6.7%) at 10:00 AM
    • Existing Home Sales ( 4.31M est.; prev. 5.27M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2960.24, 2953.63 and 2922.35
  • Critical resistance levels for S&P 500 are 2975.63, 2980.29 and 2985.93
  • Key levels for E-mini futures: break above 2963.75, the high of 8:45 PM and break below 2941.50, the low of 4:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2020) closed at 2966.25 and the index closed at 2971.61 – a spread of about -5.25 points; futures closed at 2968.50 for the day; the fair value is -2.25
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -9.25; Dow down by -83 and NASDAQ by -21.00

Markets Around The World

  • Markets in the East closed mostly down – Mumbai and Seoul were up
  • European markets are mostly lower – Spain is up; Switzerland is closed for trading
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Sugar
    • Cotton
    • NatGas
    • Gold
    • Copper
    • Platinum
    • Palladium
    • Silver
    • Coffee (Unch.)
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.666%, down from May 20 close of 0.680%;
    • 30-years is at 1.377%, down from 1.399%
    • 2-years yield is at 0.161% unchanged
    • The 10-Year-&-2-Year spread is at 0.501 down from 0.515
  • VIX
    • Is at 28.65; up +0.66 from May 20 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 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 relatively small green candle that gapped up and closed above Monday’s high with almost no lower and small upper shadow; near a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; above 90
    • RSI-9 is just 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)
  • Moving sideways since 10:00 AM on May 18; 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 declining 10:00 AM on Wednesday after making Bearish Divergence; near 50
    • %K is above %D; near 30;
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Drifting sideways since 11:30 A on Monday within a horizontal channel between 2975.00 and 2908.00; 61.8% extension target is near 3016.50 and 100% extension target s near 3042.00
    • RSI-21 is moving between 50 and 40 since 9:30 PM
    • %K is crisscrossing %D higher
  • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) drifting sideways to up since 2:15 AM
  • The Bollinger Band was narrow from 2:15 AM to 7:15 AM; expanding since with price walking up the upper band
    • Stochastic (9, 1, 3): %K is below %D since 8:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Wednesday, May 20 in mixed volume. Most indices made small green candle. NASDAQ Composite and Russell 2000 traded in lower volume.

NASDAQ Composite is leading and is breaking above a resistance zone. All S&P 500 sectors were in red.

From Briefing.com:

The S&P 500 gained 1.7% on Wednesday in a broad-based advance to close at its highest level since March 6. The Nasdaq Composite (+2.1%) and Russell 2000 (+3.0%) increased more than the benchmark index, while the Dow Jones Industrial Average rose 1.5%.

[…]

All 11 S&P 500 sectors contributed to the advance.

[…]

Separately, the FOMC Minutes from the April meeting revealed that policymakers discussed targeting yields on shorter tenors and considered changes to how forward guidance is expressed. The 2-yr yield declined two basis points to 0.16%, and the 10-yr yield declined three basis points to 0.68%. The U.S. Dollar Index declined 0.2% to 99.14.

Wednesday’s economic data was limited to the weekly MBA Mortgage Applications Index, which decreased 2.6% following a 0.3% increase in the prior week.

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