Market Remarks

Morning Notes – Thursday June 4, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower
  • The odds are for a down day with good chance of sideways to up move from pre-open levels around 3098.00 – watch for break below 3086.00 and break above 3112.75 for clarity
  • Key economic data due:
    • Unemployment Claims ( 1877K vs. 1820K est.; prev. 2126K) at 8:30 AM
    • Revised Nonfarm Productivity (-0.9% vs. -2.5% est.; prev. -2.5) at 8:30 AM
    • Revised Unit Labor Costs ( 5.1% vs. 4.8% est.; prev. 4.8%) at 8:30 AM
    • Trade Balance ( -49.4B vs. -41.5B est.; prev. -44.4B) at 8:30 AM
    • ECB Press Conference

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3098.90, 3080.95 and 3061.20
  • Critical resistance levels for S&P 500 are 3111.99, 3130.94 and 3136.72
  • Key levels for E-mini futures: break above 3112.75, the high of 7:30 AM and break below 3086.00, the low of 6:45 AM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (June 2020) closed at 3119.25 and the index closed at 3122.87 – a spread of about -3.50 points; futures closed at 3117.75 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -20.25; Dow by -125 and NASDAQ by -29.75

Markets Around The World

  • Markets in the East closed mostly higher – Shanghai and Mumbai were lower
  • European markets are mostly down – Italy is up
  • Currencies:
    Up Down
    • EUR/USD
    • Dollar index
    • USD/CAD
    • INR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Cocoa
    • Crude Oil
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield is at 0.754%, down from June 3 close of 0.761%;
    • 30-years is at 1.544%, down from 1.551%
    • 2-years yield is at 0.188% down from 0.200%
    • The 10-Year-&-2-Year spread is at 0.566 up from 0.561
  • VIX
    • Is at 26.36; up +0.70 from June 3 close; below 5-day SMA;
    • Recent 39.28 on May 14; low 24.92 on March 3
    • Sentiment: Risk-On

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

Monthly
  • Uptrend under pressure
  • May 2020 was a green candle with small upper shadow and a lower shadows that was one third of the real body;
    • Stochastic %K is above %D and above 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 middle band of the 120-month regression channel after only third break of channel since 2009 and first close below it
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on May 29 was a green spinning top candle breaking away from a congestion area;
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI (9) is above 50
  • The week was up +88.86 or +3.0%; the 5-week ATR is 135.31
  • The weekly week pivot point =3027.58, R1=3085.40, R2=3126.50; S1=2986.48, S2=2928.66; R1/R2/R2 pivot level were breached
  • An up 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; at/below 39-week SMA; above 89-week SMA
  • Uptrend since March 23
Daily
  • A green candle that gapped up at the open; small upper shadow and no lower shadow; near 3136.00, the high of March 4 and 78.6% Fibonacci retracement level
    • %K is crisscrossing above %D; above 80;
    • RSI-9 is near 70; above 8-day RSI;
  • Above 20-day EMA and 50-day EMA; above 100-day SMA; at /below 200-day SMA;
  • Uptrend since March 23
2-Hour (E-mini futures)
  • Moving up since 2:00 AM on May 22; bounced off 50-bar EMA on May 27 and on May 29; retracing from high of 3129.50 to EMA20 near 3098.00
    • RSI-21 declined to near 50 from above 75; Potential Bearish Divergence
    • %K is below %D
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving sideways to down since 3:30 PM on Wednesday; broke above a symmetrical triangle on Tuesday and achieved the 100% extension target near 3124.00
    • RSI-21 has declining from above 65 to near 40
    • %K is crisscrossing %D; near 10
  • Below EMA10 of EMA50, which is below EMA20
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down since 3:15 PM
  • The Bollinger Band was narrow from 1:15 Am to 4:45 AM; expanding since
    • Stochastic (9, 1, 3): %K is crisscrossing %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, June 3 in higher volume. Indices gapped up at the open and then mostly traded higher for rest of the day. All but one S&P sectors were up. Healthcare was down. Indices are mostly rising after making a low at 12:30 PM on May 29.

From Briefing.com:

The S&P 500 extended its recovery rally by 1.4% on Wednesday, as the latest data continued to depict signs of a turnaround in the economy. The Dow Jones Industrial Average (+2.1%) and Russell 2000 (+2.4%) rose more than 2.0%, while the Nasdaq Composite (+0.8%) struggled to keep pace.

[…]

Within the S&P 500, the industrials (+3.9%), financials (+3.8%), and energy (+3.1%) sectors advanced the most and carried the benchmark index back above the 3100 level. The continued rise in oil prices ($37.56/bbl, +0.46, +1.3%) following an unexpected decline in weekly crude inventories was an added benefit for energy stocks. The health care sector (-0.2%) closed lower.

[…]

Safe-haven assets were out of favor amid the bullish bias in stocks. Gold futures declined 1.7% to $1704.90/ozt, the U.S. Dollar Index declined 0.4% to 97.28, and the 10-yr yield rose eight basis points to 0.76%. The 2-yr yield increased three basis points to 0.19%.

[..]

• The ISM Non-Manufacturing Index rebounded to 45.4% in May (Briefing.com consensus 44.0%) from 41.8% in April. The dividing line between expansion and contraction is 50.0%.
o The key takeaway from the report is that the pace of contraction in the non-manufacturing sector decelerated in May. Things still aren’t good in terms of business activity, but they were evidently considered by respondents to be less bad than what was seen in April.
• The ADP Employment Change Report estimated 2.76 million private-sector jobs were lost in May versus consensus estimates that were closer to 9.0 million.
• New orders for manufactured goods declined 13.0% m/m in April, as expected, following a downwardly revised 11.0% decline (from -10.3%) in March.
o The key takeaway from the report is that the weakness was driven by durable goods orders, which declined 17.7%, hurt by a 48.3% decline in transportation equipment orders.

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