Market Remarks

Morning Notes – Tuesday October 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day with a good chance of  sideways to down move from pre-open levels; the daily bias is down; elevated volatility – watch for a break above 3410.00 and break below 3392.50 for clarity
  • Key economic data report:
    • Core Durable Goods ( 0.8% vs. 0.3% est.; prev.0.6% ) at 8:30 AM
    • Durable Goods ( 1.9% vs. 0.5% est.; prev.0.5%) at 8:30 AM
    • HPI ( 0.7% est.; prev. 1.0%) at 9:00 AM
    • S&P/CS Composite-20 HPI (4.2% est.; prev. 3.9%) at 9:00 AM
    • CB Consumer Confidence ( 102.1 est.; prev. 101.8) at 10:00 AM
    • Richmond Manufacturing Index ( 18 est.; prev. 21) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3402.01, 3382.65, and 3364.86
  • Critical resistance levels for S&P 500 are 3415.34, 3441.42, and 3465.60
  • Key levels for E-mini futures: break above 3410.00, the high of 6:30 AM and break below 3392.50, the low of 4:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (December 2020) closed at 3394.50 and the index closed at 3400.97 – a spread of about -6.50 points; futures closed at 3393.50 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +13.75; Dow by +77, and NASDAQ by +65.00

Markets Around The World

  • Markets in the East closed mostly lower – Shangai and Mumbai closed higher
  • European markets are lower;
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Gold
    • Palladium
    • Cocoa
  • Bond
    • 10-years yield closed at 0.801%, down from October 23 close of 0.841%;
    • 30-years is at 1.594% down from 1.645%
    • 2-years yield is at 0.153% down from 0.170%
    • The 10-Year-&-2-Year spread is at 0.648 down from 0.671
  • VIX
    • Is at 32.16; down -0.30 from October 26 close; above 5-day SMA;
    • Recent high =  38.28 on September 4; low = 24.03 on October 9
    • Sentiment: Risk-Off to Neutral

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

Monthly
  • Uptrend
  • September 2020 was a red candle with long upper and lower shadows; made an all-time high
    • Stochastic %K crossing below %D from above 90; potential %D Bearish Divergence
    • RSI-9 turning down from near 70; falling below a downtrend line that it broke above in August
    • Retreating from the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on October 23 was a Bearish Engulfing with almost no upper shadow and a lower shadow greater than the real body
    • Stochastic (9,1, 3): %K turning below %D;
    • RSI (9) turning down from 65
  • The week was down -18.42 or -0.5%; the 5-week ATR is 108.51
  • The weekly week pivot point=3461.05, R1=3506.76, R2=3548.13; S1=3419.68, S2=3373.97; S1 pivot level was breached
  • A down week; second in the last five weeks and fifth in last ten weeks
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23 Under Pressure
Daily
  • A relatively large red candle with upper almost no shadow and a lower shadow equal to the real body in size; declining since October 12 in small steps
    • %K crossing below %D; below 30
    • RSI-9 turning down; near 40; below 8-day SMA
  • Below 20-day EMA; at/above 50-day EMA; above 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Rising since 12:00 PM on Monday from the lower bound of a down-sloping flag that is forming since October 12; near the mid-point of the flag
    • RSI-21 bouncing off 20 to above 50;
  • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down since 2:00 PM on October 12 below a down trendline
    • RSI-21 moving higher to above 50 from near 20 at 13:00 PM on Monday
    • %K is above %D since 4:30 AM
  • Above EMA20, which is at/above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways since 9:45 PM
  • The Bollinger Band is expanding slightly since 6:30 AM with price near the upper band
    • Stochastic (9, 1, 3): %K is crossed below %D at 7:45 AM from near 100
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday, October 26 in higher volume. Indices are in a downtrend in Daily timeframe since October 12. Indices opened lower for the week on Monday and then traded down before recouping some of the losses in the final hours of trading. All S&P sectors closed down.

From Briefing.com:

The S&P 500 fell 1.9% on Monday on familiar concerns surrounding the economy, although it was down as much as 2.9% intraday. The Nasdaq Composite declined 1.6%, the Dow Jones Industrial Average declined 2.3%, and the Russell 2000 declined 2.2%. […]

Accordingly, the cyclical energy (-3.5%), industrials (-2.5%), materials (-2.5%), and financials (-2.2%) sectors were among the day’s laggards but so was the information technology sector (-2.2%), which typically benefits from growth concerns. The utilities sector (-0.1%) finished just below its flat line.

Conversely, longer-dated Treasuries moved higher in a safe-haven bid, which pushed yields lower. The 10-yr yield declined four basis points to 0.80%, while the 2-yr yield was unchanged at 0.16%. The U.S. Dollar Index advanced 0.3% to 93.07. WTI crude futures fell 3.3%, or $1.30, to $38.58/bbl, which weighed on energy stocks.

[…]
  • New home sales decreased to 959,000 in September (Briefing.com consensus 1.022 mln) from a downwardly revised 994,000 (from 1,011,000) in August. This represents a m/m decline of 3.5%, but a yr/yr increase of 32.1%.
[…]
  • Nasdaq Composite +26.6% YTD
  • S&P 500 +5.3% YTD
  • Dow Jones Industrial Average -3.0% YTD
  • Russell 2000 -3.8% YTD
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