Market Remarks

Morning Notes – Friday May 15, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower; broke below an upsloping wedge on 30-minute chart at 6:30 AM
  • The odds are for a down day with good chance of sideways to up move from pre-open level near 2812.00; elevated volatility – watch for break above 2841.00 for change of fortune
  • Key economic data due:
    • Retail Sales ( 16.4% vs. 12.0% est.; prev. -8.3%) at 8:30 AM
    • Core Retail Sales ( -17.2% vs. -8.6% est.; prev. -4.0%) at 8:30 AM
    • Empire State Manufacturing Index ( -48.5 vs. -65.0; prev. -78.2) at 8:30
    • Capacity Utilization ( 63.9% est.; prev. 72.7%) at 9:15 AM
    • Industrial Production ( -11.3% est.; prev. -5.4%) at 9:15 AM
    • Prelim UoM Consumer Sentiment ( 68.0est.; prev. 71.8) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2813.55, 2793.38 and 2766.64
  • Critical resistance levels for S&P 500 are 2852.80, 2874.14 and 2902.15
  • Key levels for E-mini futures: break above 2841.00, the high of 6:30 AM and break below 2786.25, the low of 11:30 AM on Thursday

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (June 2020) closed at 2846.75 and the index closed at 2852.50 – a spread of about -5.75 points; futures closed at 2847.00 for the day; the fair value is -0.25
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -28.00; Dow by -210 and NASDAQ up -131.25

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong and Mumbai were down; Tokyo, Sydney, Seoul and Singapore were up
  • European markets are mixed – Germany, U.K., Italy, Switzerland and STOXX 600 are up; France and Spain are down
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Copper
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.598%, down from May 14 close of 0.619%;
    • 30-years is at 1.263%, down from 1.296%
    • 2-years yield is at 0.133% down from 0.149%
    • The 10-Year-&-2-Year spread is at 0.465 down from 0.470
  • VIX
    • Is at 34.74; up +2.14 from May 14 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-Off

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 8 was a Bullish Engulfing candle with almost no upper shadow and small lower shadow;
    • Stochastic (9,1, 3): %K is above %D above 90
    • RSI (9) is turning up; above 50
  • The week was up +99.09 or +3.5%; the 5-week ATR is 180.60
  • The weekly week pivot point =2886.60, R1=2975.36, R2=3020.91; S1=2841.05, S2=2752.29; R1 pivot level was 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 green Piercing candle that opened lower than previous day’s low; day’s low was made mid-morning and the index rose closing near the high; small lower shadow and almost no upper shadow
    • %K crossing above %D;
    • RSI-9 turning up from below 50; below 8-day RSI;
  • At/below 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 futures)
  • Bouncing up from 2760.25 at 10:00 AM on Thursday near a support level – the low on May 3 – to a resistance near 2863.50 by 4:00 AM; retraced to below 2820.00
    • RSI-21 declining from above 60 to near 45; Bearish Divergence at 4:00 AM
    • %K is below %D; below 40
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Declining since 3:30 AM from 2863.50 to near 2815.00; potential a log-shot, uneven Inverse Head-&-Shoulder pattern; break above 2863.50 will confirm the pattern
    • RSI-21 declined from above 50 to near 40;
    • %K is below %D
  • Below EMA20; below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving down since 6:15 AM after moving sideways from 9:30 PM
  • The Bollinger Band expanding since 6:15 AM with price walking down the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D around 20
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Thursday, May 14 in mixed volume. Dow Jones Industrial Average, Dow Jones Transportation Average traded in higher volume.

Indices opened lower making day’s low by mid-morning and then mostly traded higher closing near the highs. Most made Piercing candlestick formation.

From Briefing.com:

The S&P 500 advanced 1.2% on Thursday in a turnaround trade led by the beaten-up financials sector. The benchmark index was down as much as 1.9% in early action following a relatively disappointing weekly jobless claims report.

The Dow Jones Industrial Average increased 1.6%, and the Nasdaq Composite increased 0.9%. The Russell 2000 underperformed with a 0.4% gain.

[…]

The S&P 500 financials sector (+2.6%) set the rebound pace amid strength in the bank stocks, including Wells Fargo (WFC 24.06, +1.53, +6.8%) amid speculation that it could merge with Goldman Sachs (GS 174.45, +2.65, +1.5%). The consumer staples sector (-0.3%) was the only sector without a gain today.

[…]

U.S. Treasuries finished mixed and little changed. The 2-yr yield increased one basis point to 0.16%, while the 10-yr yield declined two basis points to 0.63%. The U.S. Dollar Index increased 0.1% to 100.31.

[…]

• Total jobless claims for the week ending May 9 were 2,981,000 (Briefing.com consensus 2.475 million). That was a decrease of 195,000 from the prior week, but still an exceedingly high number all things considered. Continuing claims for the week ending May 2 increased by 456,000 to 22.833 million, which is yet another record high.
o The key takeaway from the report is that the alarmingly high level of initial and continuing claims paints a risk of a slower recovery due to weaker consumer spending activity and the rising potential that temporary job losses become permanent job losses in an elongated recovery process.
• Import prices declined 2.6% in April, and prices, excluding oil, declined 0.5%. Export prices declined 3.3% in April, and prices, excluding agriculture, also declined 3.3%.

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