Market Remarks

Morning Notes – Thursday May 7, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher; trending up since 6:30 PM; bouncing off EMA20 on 15-minute chart at 7:15 AM
  • The odds are for an up day with good chance of sideways move from pre-open levels around 2875.00, with elevated volatility – watch for break below 2863.00 for change of fortune
  • Key economic data due:
    • Unemployment Claims ( 3169K vs. 3000K est.; prev. 3846K ) at 8:30 AM
    • Prelim Nonfarm Productivity (-2.5% vs. -5.4% est.; prev. 1.2%) at 8:30 AM
    • Prelim Unit Labor Costs (4.8% vs. 4.3% est.; prev. 0.9%) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2879.37, 2847.65 and 2844.24
  • Critical resistance levels for S&P 500 are 2891.11, 2897.84 and 2917.80
  • Key levels for E-mini futures: break above 2886.25, the high of 6:00 AM on Wednesday and break below 2863.00, the low of 4:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2020) closed at 2840.00 and the index closed at 2848.42 – a spread of about -8.50 points; futures closed at 2833.50 for the day; the fair value is +6.50
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +40.25; Dow by +297 and NASDAQ by +123.50

Markets Around The World

  • Markets in the East were mostly down – Tokyo was up; Singapore was closed for trading
  • 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
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
    • Coffee
  • Bond
    • 10-yrs yield is at 0.695%, up from May 6 close of 0.711%;
    • 30-years is at 1.397%, up from 1.415%
    • 2-years yield is at 0.165% up from 0.185%
    • The 10-Year-&-2-Year spread is at 0.530 up from 0.526
  • VIX
    • Is at 31.21; down -2.83 from May 6 close; above 5-day SMA;
    • Down from all time high of 85.47 on March 18; recent high 47.77 on April 21, recent low 30.54 on April 28
    • Sentiment: Risk-On

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

Monthly
  • Uptrend under pressure
  • April 2020 was a large green candle with small upper and lower shadows; index advanced +12.7% following a decline of 12.5% in March;
    • Stochastic %K is crossing above %D and near 60; %K Bearish Divergence in January
    • RSI-9 turning up after declining to 34.91, the lowest level since April 2009, from above 75 in January and ; Bearish Divergence
    • Regaining the lower band of the 120-month regression channel to middle of the band; only third break below since 2009 but first close below it
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on May 1 was a small red candle with long upper shadow and small lower shadow and looking like an inverted hammer at the top;
    • Stochastic (9,1, 3): %K is above %D above 60
    • RSI (9) is turning down; near 50
  • The week was down -6.03 or -0.2%; the 5-week ATR is 192.52
  • Last week’s pivot point=2869.06, R1=2916.51, R2=3003.31; S1=2783.26, S2=2735.81; R1/R2 pivot levels were breached
  • A down week; third in last five weeks and sixth 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 Bearish Engulfing following a Gravestone Doji; small upper shadow and almost no lower shadow; near a resistance area
    • %K is below %D;
    • RSI-9 above 50; moving up in zig-zag manner; below 8-day RSI;
  • Above 20-day EMA; above 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (E-mini futures)
  • Moving sideways since 6:00 AM on May 5; sequence of higher highs and higher lows since April 21, the third such sequence since the uptrend started; broke below a shallower uptrend line from March 23 lows
    • emerging Cup-With-Handle pattern fizzled out
    • RSI-21 declining from above 70 since 6:00 AM on May 5 to below 50
    • %K is above %D since 6:00 PM on Wednesday; below 40
  • At/below EMA20; at/below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Broke below the uptrend line from May 3 low at 3:30 PM on Wednesday; bounced up to it after declining to 2823.00 at 6:30 PM; below a downtrend line from May 5 high
    • RSI-21 rising from near 30 to near 60
    • %K is crisscrossing %D around 70
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving up since 10:00 PM;
  • The Bollinger Band is stable but relative expanded
    • Stochastic (9, 1, 3): %K is below %D since 6:00 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly lower on Wednesday, May 6 in mostly lower volume. Russell 2000 closed up. Dow Jones Industrial Average traded in higher volume. Indices opened higher and for most of the days traded sideways but declined sharply in the last half hour

From Briefing.com:

Mega-cap technology stocks carried the Nasdaq Composite to a 0.5% gain on Wednesday, but another late fade in the market left the S&P 500 (-0.7%), Dow Jones Industrial Average (-0.9%), and Russell 2000 (-0.8%) in negative territory.

[…]

That wasn’t the case today, but the S&P 500 sectors that house these companies — information technology (+0.7%), consumer discretionary (+0.3%), and communication services (-0.4%) — had done a good job in offsetting the losses in the other eight sectors, including utilities (-3.5%), energy (-2.6%), and financials (-2.3%).

[…]

The 2-yr yield was unchanged at 0.17%, while the 10-yr yield increased five basis points to 0.71%. The U.S. Dollar Index increased 0.5% to 100.18. WTI crude lost 2.4%, or $0.58, to $23.95/bbl.

[…]

• The ADP Employment Change report pointed to a net loss of 20.236 million nonfarm payrolls in April (Briefing.com consensus -21.5 million) while the March reading was revised down to -149,000 from -27,000.
• The weekly MBA Mortgage Applications Index increased 0.1% following a 3.3% decline in the prior week.

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