Market Remarks

Morning Notes – Friday June 5, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher
  • The odds are for an up day with elevated volatility – watch for break below 3130.00 for change of fortune
  • Key economic data due:
    • Non-Farm Employment Change (2509K vs. -7750K est.; prev. -20537K) at 8:30 AM
    • Average Hourly Earnings (-1.0% vs. 1.0% est.; prev. 4.7) at 8:30 AM
    • Unemployment Rate (13.3% vs. 19.4% est.; prev. 14.7%) at 8:30 AM
    • Consumer Credit ( -20.0B est.; prev. -12.0B) at 3:00 PM
    • ECB Press Conference

Directional Bias Before Open:

  • Weekly: Uptrend Since March 23
  • Daily: Uptrend since March 23
  • 120-Min: Up
  • 30-Min: Up
  • 15-Min: Up
  • 6-Min: Up-Side

Key Levels:

  • Critical support levels for S&P 500 are 3130.94, 3115.83 and 3099.15
  • Critical resistance levels for S&P 500 are 3182.51, 3198.30 and 3213.73
  • 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 Thursday at 4:00 PM, S&P futures (June 2020) closed at 3110.00 and the index closed at 3112.35 – a spread of about -2.25 points; futures closed at 3110.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +47.00; Dow by +600 and NASDAQ by +24.00

Markets Around The World

  • Markets in the East closed higher
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
    • EUR/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Cocoa
    • 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 24.97; down -0.84 from June 4 close; below 5-day SMA;
    • Recent high 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 small Harami Doji candle; 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 3145.00
    • RSI-21 declined from near 70 to near 60 Potential Bearish Divergence
    • %K is below %D
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Moving up since 3:00 PM on Thursday; broke above a Double Bottom or a symmetrical triangle during Asian session on Tuesday and achieved the 61.8% extension target near 3146.00; the 100% extension target is near 3160.00
    • 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
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways since 4:15 AM
  • The Bollinger Band relative stable, but expanded, since 12:00 AM; price first walked up the upper band and then retraced to middle band
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up

Previous Session

Major U.S. indices closed mostly lower on Thursday, June 4 in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average closed higher. DJT and NASDAQ Composite traded in higher volume. Most indices made Doji or similar indecisive candle. Four S&P sectors – Energy, Materials, Industrials and Financials closed up.

From Briefing.com:

The S&P 500 declined 0.3% on Thursday in a mixed session to snap a four-session winning streak. The Dow Jones Industrial Average eked out a 0.1% gain, the Nasdaq Composite declined 0.7%, and the Russell 2000 closed flat.

Early in the session, the S&P 500 overcame a negative start, but failed to break above the 3130 level, which was yesterday’s high and the high from March 4. The Nasdaq 100 (-0.8%) even set a new all-time high before retracing gains alongside the broader market. Technical factors, then, appeared to have a role in calming this market down.

The information technology (-0.8%) and health care (-0.8%) sectors were influential laggards, but the rate-sensitive real estate (-1.8%) and utilities (-2.0%) sectors declined the most amid an increase in longer-dated Treasury yields. The 10-yr yield rose six basis points to 0.82%, while the 2-yr yield was flat at 0.19%.

[…]

• Initial claims for the week ending May 30 decreased by 249,000 to 1.877 million (Briefing.com consensus 1.800 million). Continuing claims for the week ending May 23 increased by 649,000 to 21.487 million.
o The key takeaway from the report is twofold: (1) initial claims are still extremely high and (2) continuing claims didn’t continue to improve, denoting some slowness in rehiring activity.
• A revision reported by the BLS indicated nonfarm business sector labor productivity decreased 0.9% (Briefing.com consensus -2.6%) in the first quarter versus an originally reported decrease of 2.5%. Unit labor costs, meanwhile, increased 5.1% versus an originally reported 4.8% increase.
o The key takeaway from the report is that productivity was better than expected in the first quarter, but it was still weak all the same.
• The U.S. trade deficit widened to $49.4 billion in April (Briefing.com consensus -$49.8 billion) from an upwardly revised $42.3 billion (from -$44.4 billion) in March.
o The key takeaway from the report is that it was accented by a sizable decline in both exports and imports, which was a byproduct of reduced demand due to shutdown measures implemented around the globe to help contain the spread of COVID-19.

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