Market Remarks

Morning Notes – Friday August 21, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways day – watch for a break below 3356.75 and break above 3379.50 for clarity
  • Key economic data due:
    • Flash Manufacturing PMI ( 51.9 est.; prev. 50.9) at 9:45 AM
    • Flash Services PMI  ( 50.9 est.; prev. 50.0) at 9:45 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3374.79, 3354.69 and 3326.44
  • Critical resistance levels for S&P 500 are 3390.80, 3399.54, and 3413.11
  • Key levels for E-mini futures: break above 3379.50, the high of 6:00 AM and break below 3356.75, the low of 8:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3382.00 and the index closed at 3385.51 – a spread of about -3.50 points; futures closed at 3380.75 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures are mixed – at 9:15 AM, S&P 500 futures were down by -2.00; Dow down by -2 and NASDAQ up by +13.75

Markets Around The World

  • Markets in East closed mostly higher  Sydney closed lower
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • INR/USD
  • Commodities:
    Up Down
    • Palladium
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield is  at 0.630%, down from August 20 close of 0.644%;
    • 30-years is at 1.358% down from 1.377%
    • 2-years yield is at 0.141% down from 0.145%
    • The 10-Year-&-2-Year spread is at 0.489 down from 0.499
  • VIX
    • Is at 23.63; up +0.92 from August 20 close; above 5-day SMA;
    • Recent high 33.67 on July 14; low 20.28 on August 11
    • Sentiment: Risk-Neutral

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

Monthly
  • Uptrend Resumed
  • July 2020 was a green candle with almost no  upper and lower shadows;
    • Stochastic %K is above %D and above 80; %K Bearish Divergence in January
    • RSI-9 rising above 60 but still below a downtrend line from January 2018 high
    • Rising above 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 August 14 was a small spinning top green candle
    • Stochastic (9,1, 3): %K crossed below %D; above 90
    • RSI (9) is rising and near 70
  • The week was up +27.57 or +0.6%; the 5-week ATR is 80.29
  • The weekly week pivot point =3362.45, R1=3398.35, R2=3423.84; S1=3336.90, S2=3300.94; R1 pivot level was 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
Daily
  • A green candle that opened previous day’s low but closed above it close; small upper and lower shadows;
    • %K is crossing above %D; above 80
    • RSI-9 is just below 70; above 8-day RSI
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23
2-Hour (E-mini futures)
  • Moving sideways since 2:00 PM on August 12; Moving up since 10:00 AM on July 30; broke above a descending triangle at 6:00 AM on August 3; 1.uptrend since June 28;
    • RSI-21 declining since 6:00 PM from near 70
    • %K is crossing above %D near 30;
  • Below EMA10 of EMA50, which is below EMA20
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving down since 8:00 PM; essentially moving sideways since 9:30 AM on August 12
    • RSI-21 declining since 8:00 PM from near 70 to near 45
    • %K is above %D;
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving down since 1:30 AM
  • The Bollinger Band expanding since 2:45 AM; price walked down the lower band till 8:00 AM; bouncing up to the mid-band
    • Stochastic (9, 1, 3): %K is above %D above 90
  • Bias: Side

Previous Session

Major U.S. indices closed mostly higher on Thursday, August 20 in mostly lower volume. Russell 2000 and NYSE Composite closed lower. Russell 2000 traded in higher volume. Most indices are trading within a narrow band for the past few days. All but two S&P sectors – Technology and Real Estate – closed lower.

From Briefing.com:

The large-cap indices closed higher on Thursday, as the upwards momentum in the mega-caps overshadowed any underlying weakness in the market. The Nasdaq Composite rallied 1.1% for another record close, while the S&P 500 (+0.3%) and Dow Jones Industrial Average (+0.2%) posted smaller gains. The Russell 2000 declined 0.5%. […]

The big gains in these stocks today carried the information technology (+1.4%), communication services (+1.4%), and consumer discretionary (+0.1%) sectors into positive territory, and the real estate sector (+1.1%) also showed strength after underperforming yesterday.

These were the only sectors that finished higher. The energy sector fell 2.1%, but no other sector lost more than 1.0%.

[…]

U.S. Treasuries finished the day with modest gains. The 2-yr yield declined two basis points to 0.12%, and the 10-yr yield declined three basis points to 0.64%. The U.S. Dollar Index declined 0.2% to 92.74. WTI crude futures declined 0.6%, or $0.27, to $42.62/bbl.

[…]
  • Initial claims for the week ending August 15 increased by 135,000 to 1.106 million (Briefing.com consensus 990,000). Continuing claims for the week ending August 8 decreased by 636,000 to 14.844 million.
    • The key takeaway from the report is that it covered the week in which the survey is conducted for the August Employment Situation Report. The jump in initial claims above 1.1 million is going to temper economists’ expectations for gains in August nonfarm payrolls.
  • The Conference Board’s Leading Economic Index (LEI) increased 1.4% m/m in July (Briefing.com consensus 1.1%) on the heels of an upwardly revised 3.0% increase (from 2.0%) in June. This was the third straight monthly increase for the index following three straight monthly declines for the February-April period.
    • The key takeaway from the report is that, despite three straight monthly increases, the July index level of 104.4 remains 6.6% below the 111.8 level seen in February (i.e. the pre-COVID shutdown phase).
  • The Philadelphia Fed Index decreased to 17.2 in August (Briefing.com consensus 21.0) from 24.1 in July.
[…]
  • Nasdaq Composite +26.6% YTD
  • S&P 500 +4.8% YTD
  • Dow Jones Industrial Average -2.8% YTD
  • Russell 2000 -6.2% YTD

..NYSE Adv/Dec 1198/1761. ..NASDAQ Adv/Dec 1301/1967.
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