Morning Notes – Monday July 20, 2020

Sunil Sharma

4 years ago

Directional Bias For The Day:

S&P Futures are higher;
The odds are for a sideways day moving within a range – watch for a break above 322.25 and break below 3190.25 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: Up-Side
30-Min: Up-Side
15-Min: Up-Side
6-Min: Side

Key Levels:

Critical support levels for S&P 500 are 3217.43, 3205.65 and 3198.59
Critical resistance levels for S&P 500 are 3233.529, 3238.28 and 3253.58
Key levels for E-mini futures: break above 3222.25, the high of 7:30 PM on July 19 and break below 3190.25, the low of 3:00 AM

Pre-Open

On Friday at 4:00 PM, S&P futures (September 2020) closed at 3216.50 and the index closed at 3224.73 – a spread of about -8.25 points; futures closed at 3214.00 for the day; the fair value is +2.50
Pre-NYSE session open, futures are mixed – at 8:30 AM, S&P 500 futures were down by -6.25; Dow down by -50 and NASDAQ up by +24.00

Markets Around The World

Markets in East closed mixed
European markets are mostly higher
Currencies: U.S. Dollar is up
Commodities: Crude Oil is down; gold is up
Bond: Treasury yields are down
VIX
- Is at 26.30; up +0.62 from July 17 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 17 was a small green real body candle with large lower shadow and small upper shadow Stochastic (9,1, 3): %K is above %D; RSI (9) is above 60 The week was up +39.69 or +1.2%; the 5-week ATR is 137.59 The weekly week pivot point =3196.889, R1=3266.124, R2=3307.51; S1=3155.50, S2=3086.27; R1/R2 pivot levels were breached An up week; fourth 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 small lower and upper shadows resembling a Doji; in a congestion area since July 6; %K is above %D; potential Bearish Divergence 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 sideways since 6:00 PM on July 14; moving up since 6:00 PM on June 28 from 3004.75 RSI-21 moving around 50 %K is above %D below 60 At/above EMA20, which is above EMA10 of EMA50 Bias: Up-Side
*30-Minute (E-mini futures)*	Moving sideways since 6:00 PM on July 14 within 3192.00 and 3233.00; RSI-21 moving between 40 and 50 %K is crisscrossing %D above 80; At/above EMA20, which is above EMA10 of EMA50 Bias: Up-Side
*15-Minute (E-mini futures)*	Bollinger Band (20, 2.0) moving up since 4:30 AM The Bollinger Band expanding since 4:30 AM with price walking up the upper band Stochastic (9, 1, 3): %K is below %D Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Friday, July 17 in nixed volume. Dow Jones Industrial Average closed lower. DJIA and S&P 500 traded in higher volume. Day’s price action was small and most indices made Doji and similar indecisive candlestick formations.

For the week, major U.S. indices closed mostly higher in mostly higher volume. NASDAQ Composite closed down in lower trading. Markets in Europe were up and in Asian were mostly up. US Dollar was down, crude oil and gold were up. 10-year treasury yields were down nut 30-year were up. Only one S&P sector – Technology – was down for the week.

From Briefing.com:

The S&P 500 eked out a 0.3% gain on Friday in a lackluster session led by the defensive-oriented sectors. The Nasdaq Composite (+0.3%) and Russell 2000 (+0.4%) rose comparably to the benchmark index, while the Dow Jones Industrial Average declined 0.2% amid relative weakness in financial and energy companies. […]
The lower consumer sentiment reading was closely linked with the resurgence in coronavirus cases, but investors remained willing to stay in the market. Many opted for a defensive stance that lifted the S&P 500 utilities (+2.3%), real estate (+1.4%), and health care (+1.4%) sectors into the leadership spots at the expense of the cyclical energy (-1.5%) and financials (-0.8%) sectors.
[…]
U.S. Treasuries ended the session little changed. The 2-yr yield declined one basis point to 0.14%, and the 10-yr yield increased two basis points to 0.63%. The U.S. Dollar Index declined 0.4% to 95.95. WTI crude futures declined 0.5%, or $0.20, to $40.56/bbl.
[…]

Total housing starts increased 17.3% m/m in June to a seasonally adjusted annual rate of 1.186 million units (Briefing.com consensus 1.180 million). Building permits rose 2.1% to 1.241 million (Briefing.com consensus 1.290 million).

The key takeaway from the report is that single-unit permits (+11.8%) and starts (+17.2%) were both strong, which is good to see for a housing market that is short on supply.

The preliminary University of Michigan Index of Consumer Sentiment for July dropped to 73.2 (Briefing.com consensus 77.6) from the final reading of 78.1 for June. The July reading, which is just 1.4 points above the April low, slumped in conjunction with the renewed surge in coronavirus cases and moves by some states to pause or roll back reopening efforts.

The key takeaway from the report is the acknowledgment that sentiment is destined to sink further, creating a risk for a longer recession, if Congress fails to come through with another aggressive fiscal policy response that focuses on financial relief for households and state and local governments.