Market Remarks

Morning Notes – Wednesday October 28, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day with a good chance of  sideways to an up move from pre-open levels around 3333.00; the daily bias is down; elevated volatility – watch for a break above 3345.75 and break below 3328.75 for clarity
  • Key economic data report:
    • Goods Trade Balance ( -84.8B est.; prev.-82.9B ) at 8:30 AM
    • Prelim Wholesale Inventories ( 0.4% est.; prev.0.4%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3329.92, 33323.35, and 3306.88
  • Critical resistance levels for S&P 500 are 3347.71, 3354.54, and 3364.86
  • Key levels for E-mini futures: break above 3345.75, the high of 5:00 AM and break below 3328.00, the low of 7:00 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2020) closed at 3383.75 and the index closed at 3390.68 – a spread of about -7.00 points; futures closed at 3383.00 for the day; the fair value is +0.75
  • Pre-NYSE session open, futures are lower – at 7:45 AM, S&P 500 futures were down by -45.50; Dow by -445, and NASDAQ by -127.50

Markets Around The World

  • Markets in the East closed mixed – Shangai, Sydney, and Seoul closed up; Hong Kong, Tokyo Mumbai, and Singapore closed down
  • European markets are lower;
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-years yield closed at 0.778%, down from October 26 close of 0.801%;
    • 30-years is at 1.571% down from 1.594%
    • 2-years yield is at 0.150% down from 0.153%
    • The 10-Year-&-2-Year spread is at 0.628 down from 0.648
  • VIX
    • Is at 36.60; up +3.25 from October 27 close; above 5-day SMA;
    • Recent high =  38.28 on September 4; low =  24.14 on October 12
    • Sentiment: Risk-Off

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 small red On-Neck candle, just below the close of Monday and entirely within its lower shadow, indicating a good chance of the continuation of the down move; downtrend since October 12 in small steps
    • %K below %D; below 20
    • RSI-9 moving down; near 40; below 8-day SMA
  • Below 20-day EMA; at/below 50-day EMA; above 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Breaking below the lower bound of a down-sloping flag that is forming since October 12; at a critical support point, the low of 4:00 PM on October 6
    • RSI-21 falling below 20;
  • 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; breaking below the low of Monday
    • RSI-21 moving along 30 since 4:00 AM after declining from above 40 at 2:00 AM
    • %K is crisscrossing %D along 20
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving down since 2:30 AM after a short sideways move
  • The Bollinger Band is expanding since 2:30 AM with price  walking down the lower band
    • Stochastic (9, 1, 3): %K is above %D since 6:45 AM
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Tuesday, October 27 in lower volume. NASDAQ Composite closed up. The day’s range was small and most indices made In-Neck or On-Neck candlesticks, which are small body candle near the close of a relatively large red real body candle.

From Briefing.com:

The S&P 500 declined 0.3% on Tuesday in a tight-ranged session. The mega-cap stocks had a strong outing that fueled the outperformance of the Nasdaq Composite (+0.6%), while many of the value/cyclical stocks dragged on the Dow Jones Industrial Average (-0.8%) and Russell 2000 (-0.9%). […]

Accordingly, the S&P 500 consumer discretionary (+0.6%), communication services (+0.6%), and information technology (+0.5%) sectors finished in positive territory.

[…]

No other sector within the benchmark index closed higher, and the cyclical industrials (-2.2%), financials (-1.9%), energy (-1.4%), and materials (-1.0%) sectors declined at least 1.0%.

[…]

U.S. Treasuries padded recent gains, pushing yields lower across the curve. The 2-yr yield declined one basis point to 0.15%, and the 10-yr yield declined two basis points to 0.78%. The U.S. Dollar Index decreased 0.1% to 92.96. WTI crude futures rebounded 2.5%, or $0.97, to $39.55/bbl.

[…]
  • Total durable orders increased 1.9% m/m in September (Briefing.com consensus +0.7%) following a downwardly revised 0.4% increase (from 0.5%) in August. Excluding transportation, durable orders rose 0.8% m/m (Briefing.com consensus +0.4%) on top of an upwardly revised 1.0% increase (from 0.7%) in August.
    • The key takeaway from the report is that business spending continued to rebound, evidenced by the fifth consecutive increase in nondefense capital goods orders, excluding aircraft, which jumped 1.0% after increasing 2.1% in August.
  • The Conference Board’s Consumer Confidence Index slipped to 100.9 in October (Briefing.com consensus 101.9) from a downwardly revised 101.3 (from 101.8) in September.
    • The key takeaway from the report is that consumers are feeling less confident about the short-term outlook, as the rise in coronavirus cases and still-high unemployment levels have contributed to concerns about job prospects.
  • The FHFA Housing Price Index for October increased 1.5% (Briefing.com consensus 0.8%).
  • The S&P Case-Shiller Home Price Index for August increased 5.2% (Briefing.com consensus 3.8%).
[…]
  • Nasdaq Composite +27.4% YTD
  • S&P 500 +5.0% YTD
  • Dow Jones Industrial Average -3.8% YTD
  • Russell 2000 -4.7% YTD
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