Market Remarks

Morning Notes – Monday November 2, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day; good chance of  sideways to up move from pre-open levels around 3300.00; the daily bias is down; elevated volatility – watch for a break above 3322.75 and break below 3262.75 for clarity
  • Key economic data report:
    • ISM Manufacturing PMI ( 59.3 vs. 55.6% est.; prev.55.4 ) at 10:00 AM
    • Construction Spending ( 0.3% vs. 1.0% est.; prev. 0.8%) at 10:00 AM
    • ISM Manufacturing PMI ( 65.5 vs. 60.5 est.; prev.62.8) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3272.09, 3237.22, and 3229.92
  • Critical resistance levels for S&P 500 are 3304.93, 3332.64, and 3364.86
  • Key levels for E-mini futures: break above 3322.50, the high of 5:30 AM and break below 3262.75, the low of 2:00 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (December 2020) closed at 3265.00 and the index closed at 3269.96 – a spread of about -5.00 points; futures closed at 3264.75 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are higher – at 9:15 AM, S&P 500 futures were up by +35.25; Dow by +369, and NASDAQ by +86.75

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Crude Oil
    • NatGas
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-years yield closed at 0.835%, up from October 29 close of 0.835%;
    • 30-years is at 1.619% down from 1.625%
    • 2-years yield is at 0.177% up from 0.153%
    • The 10-Year-&-2-Year spread is at 0.661 up from 0.682
  • VIX
    • At 37.52 @ 8:00 AM; down -0.50 from the last close; above 5-day SMA;
    • Recent high =  44.44 on June 15; low =  24.03 on October 9
    • Sentiment: Risk-On to Neutral

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

Monthly
  • Uptrend under pressure
  • October 2020 was a red candle with long upper shadow and smaller lower shadows;
    • Stochastic %K is below %D from above 90; potential %D Bearish Divergence
    • RSI-9 below 60 from near 70; below a downtrend line that it broke above briefly 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 30 was a large red candle with almost no upper shadow and a small lower shadow
    • Stochastic (9,1, 3): %K is below %D; below 20
    • RSI (9) is below 50
  • The week was down -195.43 or -5.6%; the 5-week ATR is 132.02
  • The weekly week pivot point=3315.11, R1=3396.27, R2=3522.59; S1=3188.79, S2=3107.63; S1/S2/S3 pivot levels were breached
  • A down week; second in the last five weeks and sixth in last ten weeks
  • Below 10-week EMA; above 39-week SMA, and 89-week SMA
  • Uptrend since March 23 Under Pressure
Daily
  • A small red Harami candle that opened down; almost no upper shadow and relatively longer lower shadow; downtrend since October 12 in small steps; next support at 3209.45, the low September 24
    • %K turning down but above %D; just above 10
    • RSI-9 turning down to near 30; below 8-day SMA
  • Below 20-day EMA, 50-day EMA; below 100-day; above 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Bounced off a support zone between 3198.00 and 3235.255 at 2:00 AM on October 30 to a resistance level near 3325.00
    • RSI-21 rising in steps since October 28 afternoon; just below 60; made Bullish Divergence October 29 and October 30
  • Above EMA20, at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Trending down since 2:00 PM on October 12; moving sideways since 10 AM on October 28
    • RSI-21 below 60;
    • %K is below %D; below 30
  • Above EMA20; which is above EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to up since 3:30 PM on October 30
  • The Bollinger Band expanded from 3:45 AM to 8:15 AM;
    • Stochastic (9, 1, 3): %K is crisscrossing %D around 25
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Friday, October 30 in higher volume. Indices declined in early trading then rose followed by a decline and then they closed the day by recovering a portion of the decline. Most indices have made candle formation that indicated indecision.

The indices closed the week down in higher volume. Markets in Asia and Europe also closed down. US Dollar rose for the week, so did the Japanese Yen and other currencies fell. Commodities declined and Natural Gas was the lone exception for the week. The 10-year US Bonds rose but 30-year Bonds declined.All S&P sectors were down for the week.

The month of October was down major indices in Europe, Asia, and the Americas. The Indian Sensex was an exception. The forex exchange and commodities markets were similar to that for the last week of October. Materials and Utilities were the only two S&P sectors that closed higher for October.

From Briefing.com:

The S&P 500 fell as much as 2.3% on Friday amid weakness in the mega-cap stocks, but a strong finish in the value stocks reduced that decline to 1.2% by the close. The tech-sensitive Nasdaq Composite dropped 2.5%, while the more value-oriented Dow Jones Industrial Average (-0.6%) and Russell 2000 (-1.5%) fared better. […]

The consumer discretionary (-3.0%) and information technology (-2.4%) sectors were consistent laggards all day, largely due to the losses in Apple and Amazon. Notably, the financials (+0.3%) and energy (+0.2%) sectors eked out gains as investors bought the dip into the close.

[…]

U.S. Treasuries started the session on a higher note amid the weakness in equities, but eventually succumbed to selling pressure that pushed longer-dated yields higher. The 2-yr yield was flat at 0.15%, and the 10-yr yield increased three basis points to 0.87%. The U.S. Dollar Index increased 0.1% to 94.05. WTI crude futures declined 1.2%, or $0.43, to $35.70/bbl.

[…]
  • Personal income increased 0.9% m/m in September (Briefing.com consensus +0.3%) and personal spending rose 1.4% (Briefing.com consensus 1.0%). The PCE Price Index increased 0.2% m/m, as did the core PCE Price Index, which excludes food and energy, leaving them up 1.4% yr/yr and 1.5% yr/yr, respectively.
[…]
  • The final October reading for the University of Michigan’s Index of Consumer Sentiment checked in at 81.8 (Briefing.com consensus 81.2), up from the preliminary reading of 81.2 and the final September reading of 80.4.
[…]
  • The Q3 Employment Cost Index increased 0.5% (Briefing.com consensus 0.7%), seasonally adjusted, for the three-month period ending in September 2020 after increasing 0.5% for the three-month period ending June 2020. Wages and salaries, which account for about 70% of compensation costs, rose 0.4%, while benefit costs, which make up the remainder of compensation costs, increased 0.6%.
[…]
  • The Chicago PMI decreased to 61.1% in October (Briefing.com consensus 59.0%) from 62.4% in September.
[…]
  • Nasdaq Composite +21.6% YTD
  • S&P 500 +1.2% YTD
  • Dow Jones Industrial Average -7.1% YTD
  • Russell 2000 -7.8% YTD
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