Market Remarks

Morning Notes – Thursday July 16, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down to sideways day; elevated volatility – watch for a break above 3208.25 for change of sentiments
  • Key economic data due:
    • Core Retail Sales (7.3% vs. 5.0% est.; prev. 12.1%) at 8:30 AM
    • Retail Sales (7.5% vs. 5.0% est.; prev. 18.2%) at 8:30 AM
    • Philly Fed Manufacturing ( 24.1% vs. 20.0 est.; prev. 27.5) at 8:30 AM
    • Unemployment Claims (1300K vs. 1250K est.; prev. 1310K) at 8:30 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3000.76, 3180.08 and 3166.37
  • Critical resistance levels for S&P 500 are 3210.48, 3233.69 and 3238.28
  • Key levels for E-mini futures: break above 3208.25, the high of 2:00 AM and break below 3188.50, the low of 5:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2020) closed at 3218.25 and the index closed at 3226.56 – a spread of about -8.25 points; futures closed at 3219.50 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -24.75; Dow by -221 and NASDAQ by -156.25

Markets Around The World

  • Markets in East closed mostly lower – Mumbai was up
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Coffee
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.609%, down from July 15 close of 0.630%;
    • 30-years is at 1.301% down from 1.331%
    • 2-years yield is at 0.141% down from 0.165%
    • The 10-Year-&-2-Year spread is at 0.468 up from 0.465
  • VIX
    • Is at 28.89; up +1.13 from July 15 close; below 5-day SMA;
    • Recent high 44.44 on June 15; low 23.54 on June 5
    • Sentiment: Risk-Off to 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 the third break of the channel since 2009 and first close below it
  • The sequence of higher highs and higher lows is broken
Weekly:
  • The week ending on July 10 was a small green candle with large lower shadow and almost no upper shadow
    • 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 week; third in last five weeks and seventh in last ten weeks
  • The 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 small real body with large lower shadow and small upper shadow resembling a Doji; in a congestion area since July 6;
    • %K crossed above %D above 90
    • RSI-9 is above 65; 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 since 6:00 PM on July 14; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 declining since 6:00 PM on July 15 after making Bearish Divergence
    • %K is below %D near 20
  • At/below EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving down since 8:30 AM on July 15 from a high of 3233.25 to below 3200.00;
    • RSI-21 declined from above 70 to near 40
    • %K is rising below %D after rising above 70;
  • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving down since 12:15 PM on July 15
  • The Bollinger Band is relatively narrow
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Wednesday, July 15 in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume. Indices gapped up at the open and then declined by midday before rallying again in the afternoon session. Most made small real body with large lower shadow candlestick patterns, which look like Dojis. All S&P sectors except Utilities closed up.

From Briefing.com:

The S&P 500 gained 0.9% on Wednesday in a choppy trading session following another positive vaccine update. The Dow Jones Industrial Average increased 0.9%, and the Nasdaq Composite increased 0.6%. The Russell 2000 outperformed with a 3.5% gain amid strength in small-cap cyclical stocks. […]

From a sector standpoint, the S&P 500 industrials (+2.6%), energy (+2.0%), financials (+1.9%), and materials (+1.7%) sectors benefited the most from this reopening trade, while the defensive-oriented utilities (-0.4%) and consumer staples (unch) sectors underperformed.

[…]

U.S. Treasuries finished mixed and little changed. The 2-yr yield declined one basis point to 0.14%, while the 10-yr yield increased two basis points to 0.63%. The U.S. Dollar Index declined 0.2% to 96.06. WTI crude increased 2.2%, or $0.89, to $41.13/bbl.

[…]
  • Total industrial production increased 5.4% m/m in June (Briefing.com consensus 4.6%) following an unrevised 1.4% increase in May. The capacity utilization rate improved to 68.6% (Briefing.com consensus 68.3%) from an upwardly revised 65.1% (from 64.8%) in May.
    • The key takeaway from the report was the stark disclosure that the index fell 42.6% at an annual rate for the second quarter as a whole, which was the worst downturn since the industrial retrenchment after World War II.
  • The Empire State Manufacturing Survey for July jumped to 17.2 (Briefing.com consensus 5.8) from -0.2 in June. The dividing line between expansion and contraction for this regional manufacturing survey is 0.0.
  • Import prices increased 1.4% in June, and prices, excluding oil, increased 0.3%. Export prices increased 1.4% in June, and prices, excluding agriculture, also increased 1.4%.
  • The weekly MBA Mortgage Applications Index increased 5.1% following a 2.2% increase in the prior week.
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