Market Remarks

Morning Notes – Wednesday June 17, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher
  • The odds are for an up to sideways day with elevated volatility; good chance of sideways to down move from pre-open levels around 3125.00 – watch for break below 3096,50 for change of sentiments
  • Key economic data due:
    • Building Permits ( 1.22M vs. 1.23M est.; prev. 1.07M) at 8:30 AM
    • Housing Starts Core Retail Sales (12.4% vs. 5.5% est.; prev. -15.2%) at 8:30 AM
    • Fed Chair Testimony at 12:00 PM

Directional Bias Before Open:

  • Weekly: Uptrend since March 23 under pressure
  • Daily: Uptrend since March 23 under pressure
  • 120-Min: Up-Side
  • 30-Min: Up-Side
  • 15-Min: Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for S&P 500 are 3104.49, 3076.06 and 3043.61
  • Critical resistance levels for S&P 500 are 3140.15, 3153.45 and 3199.21
  • Key levels for E-mini futures: break above 3147.00, the high of 4:00 AM and break below 3096.50, the low of 10:30 PM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2020) closed at 3115.75 and the index closed at 3124.74 – a spread of about -3.00 points; futures closed at 3118.25 for the day; the fair value is -2.50
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +11.25; Dow by +77 and NASDAQ by +53.25

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo and Mumbai closed lower
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Silver
    • Copper
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • Gold
    • Platinum
    • Palladium
    • Sugar
  • Bond
    • 10-yrs yield is at 0.745%, down from June 16 close of 0.756;
    • 30-years is at 1.537%, down from 1.539%
    • 2-years yield is at 0.197% down from 0.217%
    • The 10-Year-&-2-Year spread is at 0.548 up from 0.539
  • VIX
    • Is at 33.02; down -0.65 from June 16 close; below 5-day SMA;
    • Recent high 44.44 on June 15; low 23.54 on June 5
    • Sentiment: Risk-Neutral

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 June 12 was a large red candle that could pass as an almost Bearish Engulfing formation; small upper and lower shadows but in comparison to the real body
    • Stochastic (9,1, 3): %K is below %D;
    • RSI (9) turned down to near 50
  • The week was down -152.62 or -4.8%; the 5-week ATR is 167.57
  • The weekly week pivot point =3086.30, R1=3188.14, R2=3334.96; S1=2939.48, S2=2837.65; S1 pivot level was breached
  • A down week; second in last five weeks and fourth 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 is under pressure
Daily
  • A Doji candle that gapped up at the open;
    • %K is above %D;
    • RSI-9 is above 50; below 8-day RSI;
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA and 100-day
  • Uptrend since March 23 is under pressure
2-Hour (E-mini futures)
  • Moving up from 2923.75 at 2:00 AM on Monday to near 3150.00; moving sideways since 10:00 PM on Monday
    • RSI-21 moving around 65
    • %K is crisscrossing %D around 70
  • Above EMA10 of EMA50, which is above EMA20
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving sideways since 10:30 PM on June 15;
    • RSI-21 is above 50
    • %K is crisscrossing %D lower;
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to up since 12:00 AM on Tuesday
  • The Bollinger Band relatively stable
    • Stochastic (9, 1, 3): %K is below %D since 8:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday, June 16 in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in lower volume. Major indices gapped up at the open and made day’s high in the first hour of trading. They decline and plateaued after 10:30 AM. Most made Doji like candlestick formations. All S&P sectors closed higher.

From Briefing.com:

The S&P 500 gained 1.9% on Tuesday, paced higher by all 11 of its sectors amid positive-sounding media reports and encouraging retail sales data. The Dow Jones Industrial Average (+2.0%) and Nasdaq Composite (+1.8%) performed comparably to the benchmark index, while the Russell 2000 (+2.3%) outperformed. […]

All 11 S&P 500 sectors were up big.

[…]

Five sectors increased by at least 2.0%, including the energy (+2.8%) and health care (+2.4%) sectors at the top. The utilities sector (+0.5%) lagged.

[…]

U.S. Treasuries ended the session with losses that caused some curve-steepening activity. The 2-yr yield increased two basis points to 0.21%, and the 10-yr yield increased five basis points to 0.76%. The U.S. Dollar Index increased 0.4% to 97.05. WTI crude rose 3.2%, or $1.20, to $38.56/bbl.

[…]
  • [Retail sales for May in the U.S. surged 17.7% m/m (Briefing.com consensus 9.0%) following an upwardly revised 14.7% decline in April (from -16.4%). Excluding autos, retail sales jumped 12.4% m/m (Briefing.com consensus 5.2%) following an upwardly revised 15.2% decline for April (from -17.2%).
    • The key takeaway from the Retail Sales report is that it reflects pent-up demand that was unleashed as reopening efforts took root. Granted the April base was severely depressed and sales were still down 6.1% yr/yr, yet this market is thriving right now on hopeful sequential comparisons; hence, this was seen as very encouraging news.
  • Total industrial production increased 1.4% m/m in May (Briefing.com consensus 3.0%) on the heels of a downwardly revised 12.5% decline (from -11.2%) in April. The capacity utilization rate was 64.8% (Briefing.com consensus 67.9%) versus a downwardly revised 64.0% (from 64.9%) in April.
    • The key takeaway from the report is that the improvement was all manufacturing-based thanks largely to an uptick in the output of motor vehicles and parts.
  • The NAHB Housing Market Index for June increased to 58 (Briefing.com consensus 45) from 37 in May.
  • Business Inventories declined 1.3% in April (Briefing.com consensus -0.4%) following a revised 0.3% decline in March (from -0.2%).
[…]
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