Market Remarks

Morning Notes – Friday October 30, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day; good chance of  sideways to up move from pre-open levels around 3275.00; the daily bias is down; elevated volatility – watch for a break above 3290.75 and break below 3264.25 for clarity
  • Key economic data report:
    • Core PCE Price Index ( 0.2% vs. 0.2% est.; prev.0.3% ) at 8:30 AM
    • Personal Spending ( 1.4% vs. 1.0% est.; prev. 1.0%) at 8:30 AM
    • Employment Cost Index (0.5%vs. 0.5% est.; prev.0.5%) at 8:30 AM
    • Personal Income ( 0.9% vs. 0.3% est.; prev. -2.7%) at 8:30 AM
    • Chicago PMI ( 58.2 est.; prev. 62.4) at 9:45 AM
    • Revised UoM Consumer Sentiment ( 81.2 est.; prev. 62.4) at 10:00 AM
    • Revised UoM Inflation Expectations ( prev. 2.7%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3286.88, 3259.82, and 3229.92
  • Critical resistance levels for S&P 500 are 33028.83, 3332.64, and 3364.86
  • Key levels for E-mini futures: break above 3290.75, the high of 7:00 AM and break below 3264.25, the low of 8:15 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (December 2020) closed at 3299.75 and the index closed at 3310.11 – a spread of about -10.25 points; futures closed at 3302.25 for the day; the fair value is -2.50
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -20.25; Dow by -179, and NASDAQ by -88.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are mixed – Germany, U,.K., and Switzerland are lower; France, Spain, Italy, and STOXX 600 are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CAD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Crude Oil
    • NatGas
    • Copper
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-years yield closed at 0.825%, up from October 28 close of 0.781%;
    • 30-years is at 1.601% up from 1.570%
    • 2-years yield is at 0.153% up from 0.152%
    • The 10-Year-&-2-Year spread is at 0.672 up from 0.629
  • VIX
    • At 37.58 @ 8:00 AM; down -0.01 from the last close; above 5-day SMA;
    • Recent high =  44.44 on June 15; 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 green Piercing candle with a small lower shadow and longer upper shadow; downtrend since October 12 in small steps; next support at 3209.45, the low September 24
    • %K crossing above %D; from below 10
    • RSI-9 bouncing from 26 to near 44; below 8-day SMA
  • Below 20-day EMA, 50-day EMA; at/below 100-day; above 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Bouncing off a support zone between 3198.00 and 3235.255 at 2:00 AM to above 3270.00
    • RSI-21 above 40; made Bullish Divergence at 2:00 AM and at 6:00 AM on Thursday
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down since 2:00 PM on October 12 in steps; below a down trendline; bounced off a low of 3226.00 at 2:00 AM;
    • RSI-21 bouncing off near 30 at 2:00 AM to above 50; Bullish Divergence at 2:00 AM
    • %K is below %D since 6:00 AM
  • Above EMA20; below EMA10 of EMA50
  • Bias: Down
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down since 3:30 PM on October 28
  • The Bollinger Band is expanding since 12:45 AM; price first walked down the lower band and then bounced up to the upper bound by 7:00 AM
    • Stochastic (9, 1, 3): %K is above %D since 8:15 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed higher on Thursday, October 29 in lower volume. Most indices made Piercing type candlestick formations. Indices opened lower but made day’s lows in the first half-hour of trading and then traded higher before giving some of the gains in the final hours of the session. All but two S&P Sectors – Consumer Staples and Healthcare – closed higher.

From Briefing.com:

The S&P 500 gained 1.2% on Thursday to snap a three-day losing streak in which it fell 5.6%. The Nasdaq Composite increased 1.6%, the Dow Jones Industrial Average increased 0.5%, and the Russell 2000 increased 1.2%. […]

The energy sector (+3.2%) advanced the most, though. The health care sector (-0.7%) was the lone holdout with Abiomed (ABMD 254.61, -28.39, -10.0%) being the weakest component after guiding fiscal Q3 revenue below consensus.

[…]

The positive showing in equities decreased interest in U.S. Treasuries and hedging activity. The CBOE Volatility Index fell 6.7% to 37.57. The 2-yr yield finished flat at 0.15%, while the 10-yr yield rose five basis points to 0.84%. The U.S. Dollar Index increased 0.6% to 93.92, which was one headwind for oil prices ($36.13, -1.32, -3.5%).

[…]
  • Q3 GDP increased at a record annualized rate of 33.1% (Briefing.com consensus 30.2%) following a record 31.4% annualized decline in Q2. The Q3 GDP Chair Deflator increased 3.6% (Briefing.com consensus 3.0%) after declining 1.8% in Q2.
[…]
  • Initial claims for the week ending October 24 decreased by 40,000 to 751,000 (Briefing.com consensus 763,000). Continuing claims for the week ending October 17 decreased by 709,000 to 7.756 million.
[…]
  • Pending home sales decreased 2.2% in September (Briefing.com consensus 3.5%) following an unrevised 8.8% increase in October.
[…]
  • Nasdaq Composite +24.7% YTD
  • S&P 500 +2.5% YTD
  • Dow Jones Industrial Average -6.6% YTD
  • Russell 2000 -6.4% YTD
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