Market Remarks

Morning Notes – Tuesday May 26, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher
  • The odds are for up day; good chance of moving sideways to down from pre-open levels around 3015.00; elevated volatility – watch for break below 3004.00
  • Key economic data due:
    • HPI ( 0.1% vs. 0.6% est.; prev. 0.8%) at 9:00 AM
    • S&P/CS Composite-20 HPI (3.9% vs. 3.4% est.; prev. 3.5%) at 9:00 AM
    • CB Consumer Confidence ( 87.1 est.; prev. 86.9) at 10:00 AM
    • New Home Sales (492K est.; prev. 627K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2980.29, 2978.50 and 2959.64
  • Critical resistance levels for S&P 500 are 3030.09, 3059.64 and 3080.95
  • Key levels for E-mini futures: break above 3019.25, the high of 9:00 AM and break below 3004.00, the low of 8:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (June 2020) closed at 2950.25 and the index closed at 2955.45 – a spread of about -5.25 points; futures closed at 2953.00 for the day; the fair value is -2.75
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +54.50; Dow by +514 and NASDAQ by +151.75

Markets Around The World

  • Markets in the East closed mostly up – Mumbai was down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
  • Bond
    • 10-yrs yield is at 0.695%, up from May 22 close of 0.657%;
    • 30-years is at 1.423%, up from 1.371%
    • 2-years yield is at 0.198% up from 0.173%
    • The 10-Year-&-2-Year spread is at 0.499 up from 0.484
  • VIX
    • Is at 27.50; down -0.66 from May 22 close; below 5-day SMA;
    • Recent 39.28 on May 14; low 24.92 on March 3
    • 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 22 was a green breaking away from a congestion area with almost no lower shadow and small upper shadow;
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI (9) is above 50
  • The week was up +91.75 or +3.2%; the 5-week ATR is 142.16
  • The weekly week pivot point =2949.87, R1=2985.87, R2=3016.30; S1=2919.44, S2=2883.44; S1 pivot level was breached
  • An up week; second 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; at/below 89-week SMA
  • In Correction
Daily
  • A small red candle with small upper and lower shadows; near a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; above 80
    • RSI-9 is just below 60; above 8-day RSI;
  • Above 20-day EMA and 50-day EMA; at/below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (E-mini futures)
  • Moving up since 2:00 AM on May 22; broke above the upper bound of a Horizontal Channel bounded by 2975.00 and 2771.00; 61.8% extension target is near 3101.00 and 100% extension target is near 3179.00;
    • RSI-21 above 70
    • %K is crisscrossing %D; above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving up since 3:00 AM on May 22; broke above a horizontal channel between 2975.00 and 2908.00; 100% extension target is near 3047.00 and 161.8% extension target is near 3091.00
    • RSI-21 is moving along 65
    • %K is above %D
  • Above EMA10 of EMA50, which is above EMA20
  • Bias: Up
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving up since 3:15 AM on May 22
  • The Bollinger Band relatively stable since Friday
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Up

Previous Session

Major U.S. indices closed mostly higher on Friday, May 22 in lower volume. Dow Jones Industrial Average and NYSE Composite closed down. The day’s range was small.

For the week, major U.S. indices closed up in mostly lower volumes. Dow Jones Transportation Average traded in lower volume. All S&P 500 sectors but Healthcare closed up for the week. Asian markets were mixed and Europe was up. Crude oil was up and gold was down. Dollar and Yen declined but Treasury yields rose.

From Briefing.com:

The major indices closed near session highs on Friday, preserving their weekly gains in front of the Memorial Day weekend. The S&P 500 increased 0.2%, the Nasdaq Composite increased 0.4%, and the Russell 2000 increased 0.6%. The Dow Jones Industrial Average (-0.04%) finished just below its flat line.

From a sector perspective, investors leaned defensively, evident by the positive performances from the S&P 500 real estate (+2.2%), utilities (+1.1%), and consumer staples (+0.3%) sectors. The information technology (+0.4%) and communication services (+0.5%) sectors also closed higher.

[…]

The price action was relatively muted throughout the day, with the broader market barely reacting to positive or negative news. The S&P 500 traded lower for most of the day, so the positive finish was good to see for the bulls.

[…]

U.S. Treasuries closed mixed. The 2-yr yield increased two basis points to 0.17%, while the 10-yr yield decreased two basis points to 0.66%. The U.S. Dollar Index increased 0.4% to 99.77.

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