Market Remarks

Morning Notes – Thursday September 3, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways to down day – watch for a break above 3584.25 for change of sentiments
  • Key economic data due:
    • Unemployment Claims ( 881K vs. 955K est.; prev. 1006K) at 8:30 AM
    • Revised Nonfarm Productivity ( 10.1% s 7.3% est.; prev.7.3%) at 8:30 AM
    • Revised Unit Labor Costs ( 9.0% vs. 12.0% est.; prev. 12.2%) at 8:30 AM
    • Trade Balance ( -63.6B vs. -58.2B est.; -50.7B) at 8:30 AM
    • Final Services PMI ( 54.8 est.; prev. 54.8) at 9:45 AM
    • ISM Non-Manufacturing PMI ( 57.0 est.; prev.58.1) at 10:00 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Uptrend
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 6-Min: Down

Key Levels:

  • Critical support levels for S&P 500 are 3560.02, 3538.20, and 3528.03
  • Critical resistance levels for S&P 500 are 3576.56, 3588.08, and 3600.89
  • Key levels for E-mini futures: break above 3584.25, the high of 3:30 AM and break below 3533.75, the low of 10:00 AM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2020) closed at 3576.50 and the index closed at 3580.84 – a spread of about -4.25 points; futures closed at 3579.25 for the day; the fair value is -2.75
  • Pre-NYSE session open, futures are mixed – at 8:30 AM, S&P 500 futures were down by -12.50; Dow up by +13, and NASDAQ down by -133.75

Markets Around The World

  • Markets in East closed mixed – Shanghai, Hong Kong, Mumbai, and Singapore closed down; Tokyo, Sydney, and Seoul closed up
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Cotton
  • Bond
    • 10-yrs yield is at 0.648%, down from September 2 close of 0.651%;
    • 30-years is at 1.381% up from 1.375%
    • 2-years yield is at 0.141% unchanged
    • The 10-Year-&-2-Year spread is at 0.507 down  from 0.510
  • VIX
    • Is at 26.21; down -0.36 from September 2 close; above 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
  • August 2020 was a green candle with almost small upper shadow and almost no lower shadow;
    • Stochastic %K is above %D and above 90; %K Bearish Divergence in January
    • RSI-9 rising near 70; breaking above a downtrend line from January 2018 high
    • Rising above the upper band of the 120-month regression channel for the first time after February 2020; broke below the lower channel in march 2020
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on August 28 was a relatively large green candle with almost no upper and lower shadows
    • Stochastic (9,1, 3): %K crisscrossing %D; above 90
    • RSI (9) is rising above 75
  • The week was up +110.85 or +3.3%; the 5-week ATR is 73.65
  • The weekly week pivot point=3476.79, R1=3540.45, R2=3572.89; S1=3444.35, S2=3380.69; R1/R2/R3 pivot levels were breached
  • An up week; fifth in the last five weeks and eight in last ten weeks
  • Made all-time closing and intraday highs; 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 green candle that gapped up at the open with very small lower and upper shadows;
    • %K is crisscrossing %D; above 90
    • RSI-9 is turning up; near 90; above 8-day RSI
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend
2-Hour (E-mini futures)
  • Moving sideways to down since 2:00 PM on Wednesday; moving up after a brief dip on August 31; all-time high at 6:00 AM
    • RSI-21 turned down near 50; Bearish Divergence at 6:00 PM
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving sideways to down since 3:00 PM on Wednesday
    • RSI-21 turning below50 from above 75; Bearish Divergence at 3:30 PM
    • %K is crisscrossing %D around 20
  • Below EMA10 of EMA50, which is below EMA20
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down since 7:45 PM
  • The Bollinger Band narrowed from 8:00 PM to 5:15 AM; expanding sing with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D higher from below 10
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, September 2 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. NASDAQ Composite, S&P 500, and Wilshire 5000 Total Market Index made all-time closing and intraday highs. All S&P sectors except Energy closed higher.

From Briefing.com:

The S&P 500 rose 1.5% on Wednesday for its 22nd record close of the year, as the bull market found strong support from a wide range of equities. The Nasdaq Composite also set new records with a 1.0% gain. The Dow Jones Industrial Average rose 1.6%, and the Russell 2000 rose 0.9%.

Ten of the 11 S&P 500 sectors closed in positive territory, with gains ranging from 0.9% (information technology) to 3.1% (utilities). Only the energy sector (-0.4%) closed lower, largely due to the decline in oil prices ($41.54/bbl, -1.22, -2.9%).

[…]

Interestingly, optimism in the growth outlook might not have played a role in today’s gains. For instance, the U.S. Treasury curve experienced some curve-flattening activity due to an uptick in longer-dated Treasuries. The 2-yr yield increased two basis points to 0.13%, while the 10-yr yield declined two basis points to 0.65%. The U.S. Dollar Index increased 0.4% to 92.67.

[…]
  • Factory orders in July increased 6.4% m/m (Briefing.com consensus 5.7%) following an upwardly revised 6.4% increase (from 6.2%) in June. This is the third straight monthly increase in factory orders following a 13.5% decline in April and an 11.0% decline in March.
    • The key takeaway from the report is the affirmation that business spending picked up in July, evidenced by a 1.9% increase in new orders for nondefense capital goods excluding aircraft that was unchanged from the Advance Durable Goods Orders report.
  • The ADP Employment Change Report for August showed a slowdown from the pace of rehiring activity seen in May and June. To that end, it was estimated that 428,000 jobs were added to private-sector payrolls.
  • The weekly MBA Mortgage Applications Index declined 2.0% following a 6.5% decline in the prior week.
[…]
  • Nasdaq Composite +34.4% YTD
  • S&P 500 +10.8% YTD
  • Dow Jones Industrial Average +2.0% YTD
  • Russell 2000 -4.6% YTD

..NYSE Adv/Dec 1920/1014. ..NASDAQ Adv/Dec 1957/1353.
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