Market Remarks

Morning Notes – Friday April 24, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 1:00 AM from 2755.25 and after making a Bullish Divergence on 15-minute chart
  • The odds are for an up day with elevated volatility – watch for break below 2793.50 for change of fortune
  • Key economic data due:
    • Durable Goods Orders (-14.4% vs. -12.0% est.; prev. 1.1%) at 8:30 AM
    • Core Durable Goods Orders (-0.2% vs. -6.1% est; prev. -0.7%) at 8:30 AM
    • Revised UoM Consumer Sentiment ( 67.8 est.; prev. 71.0) at 10:00 AM
    • Revised UoM Inflation Expectations (pre. 2.1%) art 10:00 AM

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Up-Side
  • 30-Min: Down-Side
  • 15-Min: Side-Up
  • 6-Min: Up

Key Levels:

  • Critical support levels for S&P 500 are 2797.11, 2777.47 and 2762.10
  • Critical resistance levels for S&P 500 are 2821.37, 2844.90 and 2857.25
  • Key levels for eMini futures: break above 2813.00, the high of 2:30 PM on Thursday and break below 2793.50, the low of 8:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P future (June 2020) closed at 2788.00 and the index closed at 2797.80 – a spread of about -9.75 points; futures closed at 2780.75 for the day; the fair value is +7.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +19.00; Dow by +147 and NASDAQ by +42.75

Markets Around The World

  • Markets in the East closed mostly down – Sydney was up
  • European markets are mostly lower – Italy and Switzerland are higher
  • Currencies:
    Up Down
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • INR/USD
    • Dollar index
    • GBP/USD
    • USD/CHF
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Cotton
    • NatGas
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.606%, down from April 23 close of 0.613%;
    • 30-years is at 1.189%, down from 1.204%
    • 2-years yield is at 0.221% down from 0.234%
    • The 10-Year-&-2-Year spread is at 0.385 down from 0.379
  • VIX
    • Is at 40.15 down -1.23 from April 23 close; below 5-day SMA;
    • Down from all time high of 85.47 on March 18
    • Risk-Neutral

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

Monthly
  • Uptrend under pressure
  • March 2020 was a large red top candle with large upper and lower shadows; index declined 12.5%;
    • Stochastic %K is below %D and near 30; %K Bearish Divergence
    • RSI-9 declined from above 75 to near 30; Bearish Divergence
    • Broke below the lower band of the 120-month regression channel to middle of the band; only third time since 2009 but first close below the lower bound
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on April 17 was a green candle with almost no upper shadow and lower shadow that was two-third of the real body;
    • Stochastic (9,1, 3): %K is above %D above 50
    • RSI (9) is moving higher; near 50
  • Last week was up +84.74 or +3.0%; the 5-week ATR is 311.50
  • Last week’s pivot point=2824.98, R1=2928.80, R2=2983.03; S1=2770.75, S2=2666.93; No pivot levels were breached
  • An up week; third in last five weeks and fifth in last ten weeks
  • All time high of 3393.52, the last swing high, was during the week of February 17; broke below the low of the week of December 24, 2018; support near 2193.81, the high during the week of August 15, 2016; sequence of higher highs and higher lows broken
  • Above 10-week EMA; below 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A small Gravestone Doji like candle; opened higher, made highs by 10:30 AM and then mostly traded down from 12:30 PM onwards
    • forming an ABCD pattern (A on March 23, B on March31 and C on April 2); achieved 61.8% extension target near 2725.00; 100% extension target is near 2897.00
    • %K is crossing above %D around 45; Bearish Divergence on April 17
    • RSI-9 turning down; moving up in zig-zag manner; above 50; below 8-day RSI;
  • Above 20-day EMA; at/below 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (e-mini future)
  • Rising in steps since April 2; broke above resistance level of 2846.00 on April 16 but is now below it; broke below an uptrend line from April 2; bouncing since 2:00 PM on April 21 to the broken uptrend line, which is acting as a resistance
    • broke above a horizontal channel – from March 11 to April 6 between 2650.00 and 2174.00; the 61.8% extension target is near 2944.00 and 100% extension target is near 3126.00
    • Sequence of higher highs & higher lows since 10:00 AM on March 23 is broken
    • RSI-21 moving up after declining to 35 at 8:00 PM on Thursday; above 50;
    • %K is above %D
  • At/above 20-bar EMA; at/below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Moving sideways since 1:00 PM on April 22 within a 60+ points trading range; rising up since 9:00 PM from 2756.25
    • RSI-21 rising from below 40 at 9:00 PM to near 55
    • %K is crisscrossing %D above 80
  • Above EMA10 of EMA50, which is at/above 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Broke above a Double Bottom at 2:45 AM after making a %D Bullish Divergence;
  • Bollinger Band (20, 2.0) moving up since 2:30 AM after sideways move from 11:00 PM
  • The Bollinger Band was narrow from 11:00 PM to 2:30 AM; expanding since with price walking up the upper bad
    • Stochastic (9, 1, 3): %K is crisscrossing %D; above 80
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly higher on Thursday, April 23 in mostly higher volume. S&P 500 and NASDAQ Composite closed lower and Dow Jones Transportation traded lower in lower volume.

Most indices made Gravestone Doji type of candlestick formation. Indices opened higher and made highs in the first hour of trading. They declined in the afternoon and closed near the lows.

From Briefing.com:

The S&P 500 advanced as much as 1.6% on Thursday after the number of weekly initial claims declined to about 4.4 million, but stocks gave up gains following a negative report regarding a potential COVID-19 treatment. The benchmark index finished just below its flat line with a 0.1% decline.

The Dow Jones Industrial Average (+0.2%) and Nasdaq Composite (unch) also closed little changed, while the Russell 2000 (+1.0%) outperformed.

[…]

The S&P 500 sectors finished mixed with six closing higher and five closing lower. The energy sector (+3.0%) outperformed amid a 21.7% spike in WTI crude futures ($16.80/bbl, +3.00), which are now up 45% since Tuesday’s settlement price. The utilities (-1.8%), real estate (-1.2%), and consumer staples (-1.0%) sectors underperformed.

[…]

U.S. Treasuries traded near their flat lines during the session. The 2-yr yield increased one basis point to 0.22%, while the 10-yr yield declined one basis point to 0.61%. The U.S. Dollar Index increased 0.1% to 100.50.

[…]

• Initial claims for the week ending April 18 decreased by 810,000 to 4.427 million (Briefing.com consensus 4.0 million). Continuing claims for the week ending April 11 increased by 4,064,000 to 15.976 million (a record high).
o The key takeaway from this report, which covers the period in which the survey for the April Employment Situation Report was conducted, is that it presents some hope that the peak of the layoffs following the COVID-19 shutdowns has passed. Nonetheless, it is also a reminder of how bad things are on the labor front.
• New home sales decreased 15.4% m/m in March to a seasonally adjusted annual rate of 627,000 units (Briefing.com consensus 655,000) from a downwardly revised 741,000 (from 765,000) in February. On a yr/yr basis, new home sales, which are counted when a contract is signed, were down 9.5%.
o The key takeaway from the report is that it isn’t as bad as feared, although COVID-19 shutdown issues didn’t ramp up until the latter half of the month, which is harbinger presumably of decidedly weaker activity in April.

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