Market Remarks

Morning Notes – Friday July 24, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a down day – watch for a break above 3238.75 for change of sentiments
  • Key economic data due:
    • Flash Manufacturing PMI ( 52.0 est.; prev. 49.8) at 9:45 AM
    • Flash Services PMI ( 51.0 est.; prev. 47.9 ) at 9:45 AM
    • New Home Sales ( 700K est.; prev. 676K) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3222.66, 3215.16 and 3200.38
  • Critical resistance levels for S&P 500 are 3243.20, 3278.42 and 3280.61
  • Key levels for E-mini futures: break above 3238.75, the high of 9:00 PM and break below 3199.25, the low of 3:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3228.75 and the index closed at 3235.66 – a spread of about -7.00 points; futures closed at 3227.50 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -11.25; Dow by -87 and NASDAQ by -101.25

Markets Around The World

  • Markets in East closed lower – Tokyo was closed
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Palladium
    • Cocoa
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield is at 0.592%, up from July 23 close of 0.582%;
    • 30-years is at 1.253% up from 1.249%
    • 2-years yield is at 0.149% up from 0.141%
    • The 10-Year-&-2-Year spread is at 0.443 up from 0.441
  • VIX
    • Is at 27.01; up +0.93 from July 23 close; above 5-day SMA;
    • Recent high 33.67 on July 14; low 23.61 on July 21
    • Sentiment: Risk-Off

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 Bearish Engulfing candle with small lower and upper shadows; finding resistance at the lower bound of the gap created on February 24; next resistance is at 3328.45
    • %K below %D from above 90; Bearish Divergence
    • RSI-9 falling below 65; below 8-day RSI; Bearish Divergence
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23 resumed
2-Hour (E-mini futures)
  • Moving down since 4:00 AM on July 23 from 3284.50 to below 3220.00; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 moving around 35
    • %K is crossing above %D from below 20
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Downtrend since 4:30 AM on July 23;
    • RSI-21 made Bullish Divergence at 3:00 AM; around 40
    • %K is below %D;
  • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving down to sideways since 7:15 PM
  • The Bollinger Band stable
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Side-Down

Previous Session

Major U.S. indices closed mostly lower on Thursday, July 23 in mostly higher volume. Russell 2000 traded down in lower volume. Indices made their day’s high in the early hours of trading, traded sideways till midday, and then declined in the afternoon session closing near day’s lows.

From Briefing.com:

The S&P 500 fell 1.2% on Thursday, as noticeable selling in the mega-cap stocks during the afternoon took the market lower. The Nasdaq Composite fell 2.3%, and the Dow Jones Industrial Average fell 1.3%. The Russell 2000, however, was unscathed with a flat reading.

Eight of the 11 S&P 500 sectors closed lower, including the information technology (-2.6%), consumer discretionary (-2.0%), and communication services (-2.0%) sectors at the bottom of the standings amid the mega-cap declines, while the consumer staples (+0.2%), financials (+0.2%), and utilities (+0.1%) sectors closed higher.

[…]

U.S. Treasuries finished the session mixed. The 2-yr yield increased two basis points to 0.15%, while the 10-yr yield declined one basis point to 0.59%. The U.S. Dollar Index weakened by another 0.2% to 94.81. WTI crude futures fell 2.0%, or $0.83, to $41.05/bbl.

[…]
  • Initial jobless claims for the week ending July 18 increased by 109,000 to 1.416 million (Briefing.com consensus 1.285 million), which is the 18th straight week they have exceeded one million. Continuing claims for the week ending July 11 decreased by 1,107,000 to 16.197 million.
    • The key takeaway from the report is that the jump in initial claims is an early reflection of the adverse impact of states pausing or rolling back their reopening activity due to the rise in coronavirus cases. In turn, it is a reminder that the momentum of initial reopening efforts will slow the progress made in labor market recovery efforts.
  • The Conference Board’s Leading Economic Index increased 2.0% m/m in June (Briefing.com consensus 2.1%) following an upwardly revised 3.2% increase (from 2.8%) in May. At 102.0, the index level is 8.8% below the level it hit in February.
    • The key takeaway from the report is the recognition that the index decreased 8.4% for the six-month span through June, with only one out of its ten components increasing over that period.
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