Market Remarks

Morning Notes – Wednesday December 2, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways to down day – watch for the break above 3657.25 and the break below 3642.50 for clarity
  • Key economic data report:
    • ADP Non-Farm Employment Change ( 307K vs. 433K est.; prev. 404K) at 8:15 AM
    • Fed Chair Powell Testifies at 10:00 AM
    • Beige Book at 2:00 PM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3645.87, 3624.73, and 3609.30
  • Critical resistance levels for S&P 500 are 3666.60, 3678.45, and 3694.84
  • Key levels for E-mini futures: break above 3657.25, the high of 5:30 AM and break below 3642.50, the low of 8:00 PM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (December 2020) closed at 3660.75 and the index closed at 3662.45 – a spread of about -1.50 points; futures closed at 3660.50 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures are lower – at 8:15 AM, S&P 500 futures were down by -10.25; Dow by -121, and NASDAQ by -43.25

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Mumbai, and Singapore closed down; Tokyo, Sydney, and Seoul closed up
  • European markets are mostly lower – the U.K. and Spain are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    • Energy futures are mixed
    • Precious metals are lower
    • Industrial metals are mostly lower
    • Most soft commodities are lower
  • Treasuries
    • 10-years yield closed at 0.934, up the last close of 0.844%;
    • 30-years is at 1.676% up from 1.573%
    • 2-years yield is at 0.176% up from 0.145%
    • The 10-Year-&-2-Year spread is at 0.758 up from 0.699
  • VIX
    • At 21.05 @ 8:00 AM; up +0.28 from the last close; above 5-day SMA;
    • Recent high =  27.27 on November 12; low =  19.51 on November 27
    • Sentiment: Risk-Off-to-Neutral

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

Monthly
  • Uptrend Resumed
  • November 2020 was a large green candle with small upper and lower shadows; all-time closing and intraday highs
    • Stochastic %K crossed above %D near 100;
    • RSI-9 near 70; breaking above a downtrend line from January 2018
    • Crossing above the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on November 27 was a green candle that opened just above previous weeks’ close and closed above it high; small lower shadow and almost no upper shadow; all-time closing high but not the intraday high;
    • Stochastic (9,1, 3): %K crossed above %D; near 90
    • RSI (9) is near 65
  • The week was up +80.81 or +2.3%; the 5-week ATR is 160.66
  • An up week following a down week; third in the last five weeks and sixth in the last ten weeks
  • The weekly week pivot point=3611.81, R1=3670.85, R2=3703.35; S1=3579.31, S2=3520.27; R1 pivot level was breached
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23 Resumed
Daily
  • A relatively small green candle with almost no lower shadow and small upper shadow; all-time high;
    • Broke above a symmetrical triangle on November 9; 50% extension target is near 3710.00; 61.8% extension target is near 3750.00; 100% extension target is near 3900.00
    • %K crossing above %D
    • RSI-9 turning up from near 65; above 8-day EMA
  • Above 20-day EMA, 50-day EMA, 100-day, and 200-day SMA
  • Confirmed Uptrend
2-Hour (E-mini futures)
  • Moving along the upper band of an ascending triangle from November 9 high; 61.8% extension target is near 3764.00 and 100% extension target is near 3823.00
    • RSI-21 declined to below 50 from above 75 at 12:00 PM on Tuesday
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Back at a downtrend line that it broke above on Monday; a flat H&S pattern emerging; a break below 3642.50 will complete the pattern with the 61.8% extension target near 3621.00 and the 100% extension target near 3607.00
    • RSI-21 declining since 3:30 AM on Tuesday; Bearish Divergence at 2:00 PM on Tuesday
    • %K is below %D;
  • At/below EMA20; which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) is moving sideways-to-up since 12:00 AM
  • The Bollinger Band is narrowing since 12:00 AM;
    • Stochastic (9, 1, 3): %K is above %D since 7:30 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday, December 1 in mostly lower volume. Russell 2000 traded in higher volume. Many indices gapped up at the open and then mostly traded sideways to down. All S&P sectors except Industrials closed higher.

From Briefing.com:

The S&P 500 (+1.1%) and Nasdaq Composite (+1.3%) closed at fresh record highs on Tuesday, as the market continued to feed off the recent bullish momentum and recovery optimism. The Dow Jones Industrial Average (+0.6%) and Russell 2000 (+0.9%) followed behind. […]

The gains were relatively broad with the communication services (+2.0%) and financials (+1.6%) sectors leading the advance. The industrials sector (-0.2%) was the lone holdout amid an observation that November manufacturing activity in the U.S. slowed down slightly more than expected and the corresponding ISM Employment Index (48.4%) slid into contraction territory.

[…]

In the U.S. Treasury market, the 2s10s yield curve spread widened to a 2020 high of 76 bps. The 2-yr yield increased three basis points to 0.17%, while the 10-yr yield rose nine basis points to 0.93%. The U.S. Dollar Index fell 0.8% to 91.16 amid relative strength in the euro, which was indicative of expectations for a European recovery.

[…]
  • The ISM Manufacturing Index slipped to 57.5% in November (Briefing.com consensus 58.0%) from 59.3% in October. The dividing line between expansion and contraction is 50.0%, so the November reading reflects an acceleration in manufacturing activity, albeit at a slower pace than the prior month.
  • […]
  • Total construction spending increased 1.3% m/m in October (Briefing.com consensus +0.7%) on the heels of a downwardly revised 0.5% decline (from +0.3%) in September. Total private construction spending rose 1.4% m/m and total public construction spending increased 1.0%.
  • […]
  • The Markit Manufacturing PMI for November was revised lower to 56.7% (Briefing.com consensus 58.0%) from 59.3% in the preliminary reading.
[…]
  • Nasdaq Composite +37.7% YTD
  • S&P 500 +13.4% YTD
  • Russell 2000 +10.1% YTD
  • Dow Jones Industrial Average +4.5% YTD
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