Market Remarks

Morning Notes – Tuesday June 2, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher but moving down sideways since 5:30 AM
  • The odds are for an up day with good chance of sideways to down move from pre-open levels around 3065.00
  • No key economic data due:

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 3053.38, 3042.81 and 3031.74
  • Critical resistance levels for S&P 500 are 3068.67, 3083.04 and 3099.52
  • Key levels for E-mini futures: break above 3075.50, the high of 5:30 AM and break below 3045.00, the low of 3:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (June 2020) closed at 3052.75 and the index closed at 3055.73 – a spread of about -3.00 points; futures closed at 3054.00 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +14.50; Dow by +144 and NASDAQ by +25.75

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Silver
    • Platinum
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.672%, up from June 1 close of 0.662%;
    • 30-years is at 1.474%, up from 1.455%
    • 2-years yield is at 0.164% up from 0.156%
    • The 10-Year-&-2-Year spread is at 0.508 up from 0.506
  • VIX
    • Is at 27.61; down -0.62 from June 1 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
  • May 2020 was a green candle with small upper shadow and a lower shadows that was one third of the real body;
    • Stochastic %K is above %D and above 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 middle band of the 120-month regression channel after only third break of channel since 2009 and first close below it
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on May 29 was a green spinning top candle breaking away from a congestion area;
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI (9) is above 50
  • The week was up +88.86 or +3.0%; the 5-week ATR is 135.31
  • The weekly week pivot point =3027.58, R1=3085.40, R2=3126.50; S1=2986.48, S2=2928.66; R1/R2/R2 pivot level were breached
  • An up 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; at/below 39-week SMA; above 89-week SMA
  • Uptrend since March 23
Daily
  • A green spinning top candle with small upper and lower shadows
    • %K is crisscrossing 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 May 27 and on May 29;
    • RSI-21 rising to near 70; Potential Bearish Divergence
    • %K is crisscrossing %D higher
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving up since 6:00 PM on Sunday; broke above a symmetrical triangle; 61.8% extension target is near 3100.00 and 100% extension target is near 3124.00
    • RSI-21 is rising from below 50 to above 65
    • %K is crisscrossing %D above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving up 1:00 AM
  • The Bollinger Band is expanding since 1:00 AM
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mixed on Monday, June 1 in lower volume. Dow Jones Transportation Average was down. All but two S&P sectors – Technology and Healthcare – were up. Indices are mostly rising after making a low at 12:30 PM on May 29.

From Briefing.com:

The major indices posted modest gains on Monday, as the market remained resilient to selling pressure and enthused by reopening prospects. The S&P 500 (+0.4%) and Nasdaq Composite (+0.4%) both increased 0.4%, while the Russell 2000 (+0.8%) and Dow Jones Industrial Average (+0.7%) pulled ahead.

[…]

At the same time, investors assumed some defensive positioning within the mega-caps and the S&P 500 real estate (+2.1%) and utilities (+1.0%) sectors, which outperformed alongside the financials (+1.2%) and energy (+1.7%) sectors.

Today’s sector laggards were the health care (-1.0%) and information technology (unch) sectors.

[…]

WTI crude futures declined 0.6%, or $0.21, to $35.28/bbl despite the news.

U.S. Treasuries ended the session little changed. The 2-yr yield and the 10-yr yield were flat at 0.15% and 0.65%, respectively. The U.S. Dollar Index declined another 0.5% to 97.82, as reopening optimism increased demand for foreign currencies.

[…]

• The ISM Manufacturing Index for May ticked up to 43.1% (Briefing.com consensus 44.0%) from 41.5% in April. This the third straight reading below 50.0%, which is the dividing line between expansion and contraction.
o The key takeaway from the report is that upticks were seen in the key measures of new orders, production, employment, prices, backlog of orders, and new export orders. All were still below 50.0%, yet they corroborate the view that the downturn in manufacturing activity wasn’t as bad as the downturn seen in April.
• Construction spending declined 2.9% m/m in April (Briefing.com consensus -6.0%) on the heels of a downwardly revised flat reading (from +0.9%) for March. Total residential spending was down 4.5% while total nonresidential spending decreased 1.8%.
o The key takeaway from the report is that total construction spending is still up 3.0% yr/yr, underpinned by a 3.8% yr/yr increase in total private construction spending and a 0.8% yr/yr increase in total public construction spending.

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