Market Remarks

Morning Notes – Monday July 13, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day; elevated volatility – watch for break below 3187.50 for change of sentiments
  • No key economic data due:

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-Side
  • 15-Min: Up-Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for S&P 500 are 3158.12, 3136.22 and 3115.70
  • Critical resistance levels for S&P 500 are 3213.79, 3223.27 and 3233.13
  • Key levels for E-mini futures: break above 3202.75, the high of 2:00 AM and break below 3187.50, the low of 4:30 AM

Pre-Open

  • On Friday at 4:00 PM, S&P futures (September 2020) closed at 3175.25 and the index closed at 3185.04 – a spread of about -9.75 points; futures closed at 3178.50 for the day; the fair value is -3.25
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +21.25; Dow by +196 and NASDAQ by +101.50

Markets Around The World

  • Markets in East closed mostly higher – Singapore was down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • GBP/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Sugar
    • Cotton
  • Bond
    • 10-yrs yield is at 0.661%, up from July 10 close of 0.633%;
    • 30-years is at 1.361% up from 1.326%
    • 2-years yield is at 0.153% down from 0.165%
    • The 10-Year-&-2-Year spread is at 0.508 up from 0.468
  • VIX
    • Is at 27.71; up +0.42 from July 10 close; above 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 10 was a small green candle with large lower shadow and almost no upper shadwo
    • Stochastic (9,1, 3): %K is above %D;
    • RSI (9) is above 60
  • The week was up +55.03 or +1.8%; the 5-week ATR is 165.20
  • The weekly week pivot point =3162.52, R1=3209.34, R2=3233.64; S1=3138.22, S2=3091.40; No pivot levels were breached
  • An up  down week; third in last five weeks and seventh 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 Bullish Engulfing candle with small lower and upper shadows in a congestion area;
    • %K is crisscrossing %D above 90
    • RSI-9 is above 60; 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 up since 2:00 AM on July 10; broke above a down-sloping flag at 2:00 PM on July 10; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 declining from above 75
    • %K is crisscrossing %D above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (E-mini futures)
  • Moving sidewyas since 6:00 PM on July 12;
    • RSI-21 moving between 60 and 65
    • %K is crossing below %D;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways since 8:00 PM
  • The Bollinger Band was narrow from 10:45 PM to 5:30 AM; expanding since with price walkingup the upper band
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Friday, July 10 in mostly lower volume. Dow Jones Transportation Average traded in lower volume. Indices mostly traded higher from start to finish. All but three – Technology, Healthcare and Telecom – S&P sectors closed up.

For the week, most majors U.S. indices closed higher in higher volume from the previous shortened week due to holiday. Russell 2000 closed lower. Market in Euorpe and Asia were mixed. Dollar and crude oild declined but gold advacned. Treasury yields fell.

From Briefing.com:

The S&P 500 advanced 1.1% on Friday, as investors rotated back into growth/value stocks following a positive remdesivir update. The Dow Jones Industrial Average (+1.4%) and Russell 2000 (+1.7%) pulled ahead, while the Nasdaq Composite (+0.7%) underperformed but still closed at a record high. […]

The S&P 500 financials (+3.5%) and energy (+3.3%) sectors rose more than 3.0% amid expectations that these beaten-up sectors would outperform in a recovery. The health care sector (-0.2%) ironically closed lower while the information technology sector (unch) took a breather.

[…]

U.S. Treasuries backed off from early morning highs following the remdesivir update, sending yields higher. The 2-yr yield increased one basis point to 0.16%, and the 10-yr yield increased three basis points to 0.63% after touching 0.57% in overnight action. The U.S. Dollar Index declined 0.1% to 96.63. WTI crude rose 2.1%, or $0.94, to $40.57/bbl.

[…]
  • The Producer Price Index for final demand, led by a 0.3% decline in prices for final demand services, decreased 0.2% m/m (Briefing.com consensus +0.4%) following a 0.4% increase in May. Excluding food and energy, the index for final demand decreased 0.3% m/m (Briefing.com consensus +0.1%) after declining 0.1% in May.
    • The key takeaway from the report is that there are few, if any, inflation pressures at the producer level due to generally weak demand.
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