Market Remarks

Morning Notes – Wednesday August 26, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are little changed;
  • The odds are for a sideways day – watch for a break above 3449.00 and break below 3421.00 for clarity
  • Key economic data due:
    • Core Durable Goods Orders ( 2.4% vs. 1.9% est. ; prev. 3.6% ) at 8:30 AM
    • Durable Goods Orders (1.2% vs. 4.4% est.; prev. 7.6%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3433.18, 3425.84, and 3414.02
  • Critical resistance levels for S&P 500 are 3449.94, 3456.26, and 3468.31
  • Key levels for E-mini futures: break above 3448.75, the high of 3:00 AM on Tuesday and break below 3421.75, the low of 10:30 AM on Tuesday

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2020) closed at 3440.25 and the index closed at 3443.62 – a spread of about -2.25 points; futures closed at 3443.00 for the day; the fair value is -2.75
  • Pre-NYSE session open, futures are mixed – at 8:15 AM, S&P 500 futures were up by +1.75; Dow down by -24 and NASDAQ up by +21.75

Markets Around The World

  • Markets in East closed mixed – Shangai, Tokyo, Sydney, and Singapore closed down; Hong Kong, Mumbai, and Seoul closed higher
  • European markets are mixed – Germany, France, Switzerland, and STOXX 600 are higher; U.K., Spain, and Italy are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
  • Commodities:
    Up Down
    • NatGas
    • Silver
    • Copper
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • Gold
    • Platinum
    • Palladium
    • Sugar
  • Bond
    • 10-yrs yield closed at 0.682%, up from August 24 close of 0.646%;
    • 30-years is at 1.388% up from 1.350%
    • 2-years yield is at 0.152% up from 0.154%
    • The 10-Year-&-2-Year spread is at 0.530 up from 0.492
  • VIX
    • Is at 22.09; up +0.06 from August 25 close; below 5-day SMA;
    • Recent high 33.67 on July 14; low 20.28 on August 11
    • Sentiment: Risk-Neutral

The trend and patterns on various time frames for S&P 500:

Monthly
  • Uptrend Resumed
  • July 2020 was a green candle with almost no  upper and lower shadows;
    • Stochastic %K is above %D and above 80; %K Bearish Divergence in January
    • RSI-9 rising above 60 but still below a downtrend line from January 2018 high
    • Rising above the middle band of the 120-month regression channel after the third break of the channel since 2009 and first close below it
  • The sequence of higher highs and higher lows is broken
Weekly:
  • The week ending on August 21 was a small green candle with almost no upper shadow and small lower shadow
    • Stochastic (9,1, 3): %K crossed below %D; above 90
    • RSI (9) is rising and near 70
  • The week was up +24.31 or +0.7%; the 5-week ATR is 67.22
  • The weekly week pivot point=3383.94, R1=3413.18, R2=3429.21; S1=3367.91, S2=3338.67; R1 pivot level was breached
  • An up week; fourth in last five weeks and eight in last ten weeks
  • Made all-time high of 3393.96, breaking above the last swing high of 3393.52 made during the week of February 17; last swing low 2965.66 made during the week of June 15
  • Above 10-week EMA, 39-week SMA and 89-week SMA
  • Uptrend since March 23
Daily
  • A Doji like small green candle that opened up with almost no upper shadow and small lower shadow; all-time intraday and closing highs
    • %K is above %D; above 90
    • RSI-9 is above 75; above 8-day RSI
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23
2-Hour (E-mini futures)
  • Moving sideways since 8:00 PM on August 24; moving up since 8:00 AM on August 21; Moving up since 10:00 AM on July 30; broke above a descending triangle at 6:00 AM on August 3;
    • RSI-21 moving sideways around 60 since 6:00 PM
    • %K is crisscrossing %D around 80;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving sideways since 3:30 PM on Tuesday; above an ascending triangle at 6:00 PM on Monday; 100% extension target near 3444.75 is achieved and 161.8% extension target is near 3475.50
    • RSI-21 moving around 60
    • %K crisscrossing %D around 70
  • At/above EMA20, which is at/above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways since 7:45 PM
  • The Bollinger Band stable and narrow
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Tuesday, August 25 in mostly lower volume. Dow Jones Industrial Average and Dow Jones Transportation Average closed down. Russell 2000 traded in higher volume. Day’s price movement was essentially sideways. Indices are breaking above recent resistance levels.

From Briefing.com:

The S&P 500 (+0.4%) and Nasdaq Composite (+0.8%) rose to fresh record highs on Tuesday, as the market found continued support in the mega-caps following a disappointing consumer confidence report. The Russell 2000 increased 0.2%, while the Dow Jones Industrial Average declined 0.2%.

Six of the 11 S&P 500 sectors closed higher, while five closed lower. The communication services (+1.0%), health care (+0.7%), information technology (+0.5%), and consumer discretionary (+0.5%) sectors outperformed the benchmark index, while the energy (-1.4%) and utilities (-0.9%) sectors declined the most.

[…]

U.S. Treasuries finished the session mostly lower, with longer-dated maturities seeing a bulk of the losses. The 2-yr yield increased one basis point to 0.16%, and the 10-yr yield increased four basis points to 0.68%. The U.S. Dollar Index declined 0.3% to 93.01. WTI crude futures rose 1.7%, or $0.72, to $43.33/bbl.

[…]
  • The Conference Board’s Consumer Confidence Index declined to 84.8 in August (Briefing.com consensus 93.0) from a downwardly revised 91.7 (from 92.6) in July. The August reading was the lowest reading for the index since May 2014.
    • The key takeaway from the report is the understanding that consumers’ assessment of current conditions and the short-term outlook retrenched, reflecting most likely the real economic impact of the expiration of enhanced unemployment benefits and difficult labor market conditions that will weigh on discretionary spending activity.
  • New home sales surged 13.9% m/m in July to a seasonally adjusted annual rate of 901,000 (Briefing.com consensus 787,000). That was the strongest pace of sales since December 2006 and noticeably higher than the pre-pandemic pace of 774,000 seen in January.
  • The S&P Case-Shiller Home Price Index for June increased 3.5% (Briefing.com consensus 3.6%) following a revised 3.6% increase in May (from +3.7%).
  • The FHFA Housing Price Index for August increased 0.9% following a revised 0.2% decline (from -0.3%).
[…]
  • Nasdaq Composite +27.8% YTD
  • S&P 500 +6.6% YTD
  • Dow Jones Industrial Average -1.0% YTD
  • Russell 2000 -5.8% YTD
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