Market Remarks

Morning Notes – Thursday October 29, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideways to an up day; the daily bias is down; elevated volatility – watch for a break above 3309.75 and break below 3260.25 for clarity
  • Key economic data report:
    • Avance GDP ( 32.0% est.; prev.-31.4% ) at 8:30 AM
    • Advance GPD Price Index ( 2.9% est..; prev. -1.8%) at 8:30 AM
    • Unemployment Claims (773K est.; prev.787K) at 8:30 AM
    • ECB Main Refinancing Rate ( 0.0% est.; prev. 0.5%) at 8:45 AM
    • ECB Press Conference at 9:30 AM
    • Pending Home Sales ( 3.1% est.; prev. 8.8%) 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-Down

Key Levels:

  • Critical support levels for S&P 500 are 3268.89, 3254.76, and 3229.92
  • Critical resistance levels for S&P 500 are 3282.40, 3305.90, and 3310.68
  • Key levels for E-mini futures: break above 3309.75, the high of 2:30 AM and break below 3260.75, the low of 3:30 PM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2020) closed at 3266.75 and the index closed at 3271.03 – a spread of about -3.25 points; futures closed at 3263.50 for the day; the fair value is +3.25
  • Pre-NYSE session open, futures are higher – at 7:00 AM, S&P 500 futures were up by +15.75; Dow by +110, and NASDAQ by +101.00

Markets Around The World

  • Markets in the East closed mostly lower – Shangai closed higher
  • European markets are mostly higher – Spain is lower;
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • INR/USD
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • NatGas
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-years yield closed at 0.781%, up from October 27 close of 0.778%;
    • 30-years is at 1.570% down from 1.571%
    • 2-years yield is at 0.152% up from 0.150%
    • The 10-Year-&-2-Year spread is at 0.629 down from 0.628
  • VIX
    • At 38.92 @ 6:15 AM; down -1.36 from the last close; above 5-day SMA;
    • Recent high =  44.44 on June 15; low =  24.03 on October 9
    • 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 large red candle that gapped down at the open; almost no upper and lower shadow; downtrend since October 12 in small steps; next support at 3209.45, the low September 24
    • %K below %D; below 10
    • RSI-9 moving down; below 30; below 8-day SMA
  • Below 20-day EMA, 50-day EMA, and 100-day; above 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Broke below the lower bound of a down-sloping flag and a critical support point, the low of 4:00 PM on October 6; at a support zone – between the lows of September 30 and October 2
    • RSI-21 declining from 35 after falling below 10;
  • 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; bounced off a low of 3260.75 at 3:30 PM; sideways move since 10:00 AM on Wednesday
    • RSI-21 moving between 50 and 40 since 8:00 PM after falling below 20
    • %K is crisscrossing %D below 20
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to up since 2:45 PM
  • The Bollinger Band is expanding since 2:45 AM with price  walking down the lower band
    • Stochastic (9, 1, 3): %K crossed below %D at 6:45 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply down on Wednesday, October 28 in higher volume. Indices gapped down at the open and then traded down and closed near day’s lows. All S&P Sectors closed lower.

From Briefing.com:

The S&P 500 dropped 3.5% on Wednesday, as heightened growth concerns exacerbated de-risking efforts and the recent negative momentum in the market. The Nasdaq Composite fell 3.7%, the Dow Jones Industrial Average fell 3.4%, and the Russell 2000 fell 3.0%.

Similarly, no sector was spared with losses ranging from 2.4% (real estate) to 4.3% (information technology).

[…]

Interestingly, longer-dated Treasuries gave up early gains to close little changed. The 2-yr yield and 10-yr yield both finished flat at 0.15% and 0.78%, respectively. The U.S. Dollar Index advanced 0.6% to 93.46. WTI crude futures fell 5.3%, or $2.10, to $37.45/bbl amid the stronger dollar, bearish inventory data, and demand concerns.

Separately, the weekly MBA Mortgage Applications Index increased 1.7% following a 0.6% decline in the prior week.

[…]
  • Nasdaq Composite +22.7% YTD
  • S&P 500 +1.3% YTD
  • Dow Jones Industrial Average -7.1% YTD
  • Russell 2000 -7.5% YTD
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