Market Remarks

Morning Notes – Wednesday May 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher but NASDAQ futures are down
  • The odds are for up day; good chance of moving sideways to down from pre-open levels around 3025.00; elevated volatility – watch for break below 3004.00
  • Key economic data due:
    • Richmond Manufacturing Index ( -40 est.; prev. -53) at 10:00 AM
    • Beige Book at 2:00 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3015.57, 2999.98 and 2988.17
  • Critical resistance levels for S&P 500 are 3021.72, 3030.09 and 3059.64
  • Key levels for E-mini futures: break above 3031.75, the high of 5:30 AM and break below 3004.00, the low of 3:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (June 2020) closed at 2987.75 and the index closed at 2991.77 – a spread of about -4.00 points; futures closed at 2994.50 for the day; the fair value is -6.75
  • Pre-NYSE session open, futures are mixed – at 8:45 AM, S&P 500 futures were up by +25.00; Dow up by +304 and NASDAQ down by -16.50

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Singapore closed down; Tokyo, Mumbai and Seoul were up
  • European markets are mostly higher – Switzerland is down
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • INR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.705%, up from May 26 close of 0.698%;
    • 30-years is at 1.455%, up from 1.439%
    • 2-years yield is at 0.176% up from 0.179%
    • The 10-Year-&-2-Year spread is at 0.529 up from 0.519
  • VIX
    • Is at 27.19; down -0.82 from May 26 close; below 5-day SMA;
    • Recent 39.28 on May 14; low 24.92 on March 3
    • 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 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; gapped up at the open and the gap was not filled; breaking above a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; above 80; potential Bearish Divergence
    • RSI-9 is above 60; above 8-day RSI;
  • Above 20-day EMA and 50-day EMA; above 100-day SMA; at /below 200-day SMA;
  • 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 declined to 66 from near 73; potential Bearish Divergence
    • %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 declining from near 65; potential Bearish Divergence
    • %K is below %D; Bearish Divergence
  • Above EMA10 of EMA50, which is above EMA20
  • Bias: Up
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving up since 9:15 PM
  • The Bollinger Band narrowed from 3:00 AM to 4:45 AM; expanding since with price first walking up the upper band and then declining to lower band by 8:45 Am
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Tuesday, May 26 in higher volume. Indices gapped up at the open but some traded down in the afternoon. NASDAQ Composite, S&P 500, NYSE Composite and Wilshire 5000 Total Market Index closed near day’s lows. All S&P sectors closed higher.

From Briefing.com:

The S&P 500 rallied as much as 2.2% on Tuesday on a familiar reopening trade, but some weakness into the close left the benchmark index up 1.2% for the session. The Dow Jones Industrial Average (+2.2%), Russell 2000 (+2.8%), and S&P MidCap 400 (+3.4%) outperformed, while the Nasdaq Composite increased just 0.2%.

[…]

The reopening trade was still manifested in the leadership from the financials (+5.0%) and industrials (+4.2%) sectors, and in the higher oil prices ($34.36/bbl, +$1.11, +3.3%). The heavily-weighted information technology (-0.1%) and health care (-0.2%) sectors, however, slipped into negative territory.

[…]

The U.S. Treasury curve continued to experience curve-steepening activity amid the market’s upbeat economic outlook. The 2-yr yield was unchanged at 0.17%, while the 10-yr yield increased four basis points to 0.70%. The U.S. Dollar Index declined 0.9% to 98.97.

[…]

• New home sales increased 0.6% m/m to a seasonally adjusted annual rate of 623,000 (Briefing.com consensus 485,000) from a downwardly revised 619,000 (from 627,000). On a yr/yr basis, new home sales were down 6.2%.
o The key takeaway from the report is that the strength in sales was fortified by lower selling prices.
• The Conference Board’s Consumer Confidence Index checked in at 86.6 for May (Briefing.com consensus 88.5) versus a downwardly revised 85.7 (from 86.9) for April.
o The key takeaway from the report is that attitudes about the short-term outlook increased some, reflecting some budding optimism about reopening efforts.
• The FHFA Housing Price Index for May increased 0.1% following an upwardly revised 0.8% in April (from +0.7%).
• The S&P Case-Shiller Home Price Index increased 3.9% yr/yr in March (Briefing.com consensus 3.8%) following a 3.5% increase in February.

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