Market Remarks

Morning Notes – Thursday May 28, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher but NASDAQ futures are down; moving sideways since 6:00 PM on Tuesday
  • The odds are for a sideways to an up day – watch for break below 3028.00
  • Key economic data due:
    • Prelim GDP ( -5.0% vs. -4.8% est.; prev. -4.8%) at 8:30 AM
    • Durable Goods Orders ( -17.2% vs. -19.0% est.; prev. -14.7%) at 8:30 AM
    • Core Durable Goods Orders ( -7.4% vs. -14.8% est;; prev. -0.4%) at 8:30 AM
    • Unemployment Claims (2123K vs. 2100K est.; prev 2446K ) at 8:30 AM
    • Prelim GDP Price Index (1.4% vs. 1.3% est.; prev. 1.3%) at 8:30 AM
    • Pending Home Sales ( -21.8% vs. -15.0% est.; prev. -20.8%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3017.11, 2996.27 and 2969.75
  • Critical resistance levels for S&P 500 are 3040.16, 3049.84 and 3059.64
  • Key levels for E-mini futures: break above 3049.75, the high of 9:00 AM and break below 3028.00, the low of 5:45 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2020) closed at 3031.25 and the index closed at 3036.13 – a spread of about -5.00 points; futures closed at 3035.50 for the day; the fair value is -4.25
  • Pre-NYSE session open, futures are mixed – at 9:00 AM, S&P 500 futures were up by +8.25; Dow up by +241 and NASDAQ down by -71.75

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Sydney and Mumbai closed up;  Hong Kong, Seoul and Singapore  were down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Sugar
    • Cocoa
    • Platinum
    • Palladium
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield is at 0.693%, up from May 27 close of 0.680%;
    • 30-years is at 1.465%, up from 1.434%
    • 2-years yield is at 0.188% up from 0.184%
    • The 10-Year-&-2-Year spread is at 0.502 up from 0.496
  • VIX
    • Is at 28.19; up +0.57 from May 26 close; at/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 green candle that opened up and closed higher but after making low below previous day’s low; no upper shadow and lower shadow twice the size of real body; breaking above a resistance zone and 61.8% Fibonacci retracement
    • %K is above %D; above 80;
    • RSI-9 is near 70; 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; bounced off 50-bar EMA on Wednesday;
    • RSI-21 declined below 60 from near 73; Bearish Divergence
    • %K is crisscrossing %D lower
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving sideways since 6:00 PM;
    • RSI-21 is declining from near 65 and making a Bearish Divergence
    • %K is crisscrossing %D
  • At/above EMA10 of EMA50, which is above EMA20
  • Bias: Up
15-Minute (E-mini futures)
  • Moving sideways within a symmetrical triangle
  • Bollinger Band (20, 2.0) moving sideways since 10:00 PM
  • The Bollinger Band is relatively stable since 10:00 PM
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, May 27 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. Indices traded down at the open and made the lows for the day in early morning trading before turning around and rising for rest of the day. All S&P sectors closed higher.

From Briefing.com:

The S&P 500 advanced 1.5% on Wednesday in a broad-based advance led by many of the value-oriented stocks. The Dow Jones Industrial Average (+2.2%) and Russell 2000 (+3.1%) outperformed the benchmark index, while the Nasdaq Composite increased 0.8%.

From a sector perspective, the S&P 500 financials (+4.3%) and industrials (+3.3%) sectors benefited the most from this value trade, which was based the speculation that these beaten-down cyclical groups will outperform in an economic recovery that is being priced in the stock market. The information technology sector (+0.5%) was today’s sector laggard.

[…]

U.S. Treasuries finished mixed and little changed. The 2-yr yield was unchanged at 0.17%, and the 10-yr yield declined two basis points to 0.68%. The U.S. Dollar Index increased 0.1% to 99.01. WTI crude declined 1.1% (-$0.38) to $33.98/bbl.

Wednesday’s economic data was limited to the weekly MBA Mortgage Applications Index, which increased 2.7% following a 2.6% decline in the prior week.

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