Market Remarks

Morning Notes – Monday July 6, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher
  • The odds are for an up day with good chance of  sideways move from pre-open levels near 3165.00; elevated volatility – watch for break below 3157.75 for change of sentiments
  • Key economic data due:
    • Final Services PMI (47.0 est.; prev. 46.7) at 9:45 AM
    • ISM Non Manufacturing PMI ( 50.0 est.; prev. 45.4) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3124.52, 3114.61 and 3101.27
  • Critical resistance levels for S&P 500 are 3181.49, 3189.64 and 3213.79
  • Key levels for E-mini futures: break above 3172.75, the high of 6:00 AM and break below 3157.75, the low of 5:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3121.50 and the index closed at 3130.01 – a spread of about -8.50 points; futures closed at 3129.00 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures are higher – at 9:15 AM, S&P 500 futures were up by +37.75; Dow by +364 and NASDAQ by +120.75

Markets Around The World

  • Markets in East closed mostly higher – Sydney was down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/CHF
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
    • Crude Oil
    • Sugar
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.701%, up from July 2 close of 0.669%;
    • 30-years is at 1.466% up from 1.429%
    • 2-years yield is at 0.157% up from 0.156%
    • The 10-Year-&-2-Year spread is at 0.544 up from 0.513
  • VIX
    • Is at 27.41; down -0.2 from July 2 close; below 5-day SMA;
    • Recent high 44.44 on June 15; low 23.54 on June 5
    • Sentiment: Risk-Neutral

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

Monthly
  • Uptrend under pressure
  • June 2020 was a green spinning candle with large  upper and lower shadows;
    • 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 July 3 was a near Bullsih Reversal candle, which gapped up at the week’s open
    • Stochastic (9,1, 3): %K is above %D;
    • RSI (9) is above 50
  • The week was up +120.96 or +4.0%; the 5-week ATR is 187.01
  • The weekly pivot point =3098.52, R1=3197.30, R2=3264.59; S1=3031.23, S2=2932.45; No pivot levels 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, 39-week SMA and 89-week SMA
  • Uptrend since March 23 is under pressure
Daily
  • A relativey small red candle with almost no lower shadow and small upper shadow; breaking above a symmetrical triangle and a downtrend line from high of June 8
    • %K is above %D; near 75
    • RSI-9 above 50; above 8-day RSI;
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23 is under pressure
2-Hour (E-mini futures)
  • Moving sideways to up since 10:00 PM on June 15; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 above 75
    • %K is crisscrossing %D
  • Above EMA20, whcih is aboveEMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Moving up since 6:00 PM on June 28 from 2983.50 to near 3170.00;
    • RSI-21 rising above 65
    • %K is crisscrossing %D;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sidewasy since 1:15 AM
  • The Bollinger Band is stable
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Thursday, July 2 in lower Volume. All but two S&P sectors – Real Estate and Telecom – closed higher.

For the week, U.S. indices closed higher higher in lower volume. Europe was up and most markets in Asia closed higher. Japan was down. All S&P sectors closed up. US Dollar and Japanese yen closed lower for the week. Crude Oil, gold and most commodities closed up. US Treasry yields were up for the week.

From Briefing.com:

The S&P 500 increased 0.5% on Thursday amid positive labor market data, although it was up as much as 1.6% in early action. The Nasdaq Composite (+0.5%), Dow Jones Industrial Average (+0.4%), and Russell 2000 (+0.3%) also finished near session lows, but the Nasdaq did notch another record close. […]

Every sector in the S&P 500 was on pace to close in positive territory following the data, but a late fade in the market took several sectors into the red. The cyclical materials (+1.9%), energy (+1.1%), and industrials (+0.8%) sectors set the performance pace, while the real estate (-0.3%) and communication services (-0.1%) sectors closed lower.

[…]

U.S. Treasuries finished little changed. The 2-yr yield declined one basis point to 0.15%, and the 10-yr yield was unchanged at 0.68%. The U.S. Dollar Index was also little changed at 97.22. WTI crude rose 1.7%, or $0.66, to $40.42/bbl.

[…]
  • June nonfarm payrolls increased by 4.800 million (Briefing.com consensus 3.50 million). June private sector payrolls increased by 4.767 million (Briefing.com consensus 3.00 million). June unemployment rate was 11.1% (Briefing.com consensus 12.6%), versus 13.3% in May. June average hourly earnings declined 1.2% (Briefing.com consensus -1.0%) versus a 1.0% decline in May.
    • The key takeaway from the report as far as the market is concerned is that it reflects an economy that is bouncing back from the depths of the COVID-19 shutdown period. There are still far too many people unemployed (17.750 million), yet the June numbers are moving in the right direction.
  • Initial jobless claims for the week ending June 27 decreased by 55,000 to 1.427 million (Briefing.com consensus 1.355 million).
    • The key takeaway from the report is that initial claims remain at an alarmingly high level and will continue to be a drag on economic activity.
  • The Trade Balance report for May showed a widening in the deficit to -$54.6 billion (Briefing.com consensus -$53.0 billion) from a downwardly revised $49.8 billion (from -$49.4 billion).
    • The key takeaway from the report is that exports (-$6.6 billion) and imports (-$1.8 billion) both declined in May, underscoring the adverse impact of the coronavirus on the global economy.
  • New orders for manufactured goods increased 8.0% m/m in May (Briefing.com consensus 7.2%) following a downwardly revised 13.5% decline (from -13.0%) in April.
    • The key takeaway from the report is that it reflects a recovery in new order activity following the depths of the COVID-19 shutdown period.
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