Market Remarks

Morning Notes – Thursday August 27, 2020

Sunil Sharma

Directional Bias For The Day:

  • S&P Futures are little changed;
  • The odds are for a sideways to down day – watch for a break above 3483.50 and break below 3462.25 for clarity
  • Key economic data due:
    • Unemployment Claims ( 1006K vs. 1000K est. ; prev. 1106K ) at 8:30 AM
    • Prelim GDP (-31.7% vs. -32.5% est.; prev. -32.9%) at 8:30 AM
    • Prelim GDP Price Index (-2.0% vs. -1.8% est.; prev. -1.8%) at 8:30 AM
    • Fed Chair Powell Speech – Jackson Hole at 9:10 AM
    • Pending Home Sales ( 2.5% est.; prev. 16.6%) at 10:00 AM
    • Jackson Hole Symposium – all day

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3465.83, 3444.15, and 3425.84
  • Critical resistance levels for S&P 500 are 3481.07, 3491.82 and 3504.90
  • Key levels for E-mini futures: break above 3483.50, the high of 4:30 PM on Wednesday and break below 3462.25, the low of 3:00 PM on Wednesday

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (September 2020) closed at 3475.00 and the index closed at 3478.73 – a spread of about -3.75 points; futures closed at 3480.25 for the day; the fair value is -5.25
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -5.25; Dow by -25 and NASDAQ by -21.75

Markets Around The World

  • Markets in East closed mixed – Shangai, Sydney, and Mumbai closed up; Hong Kong, Tokyo, Seoul, and Singapore closed down
  • European markets are mostly lower – Switzerland is up
  • Currencies:
    Up Down
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Platinum
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bond
    • 10-yrs yield is at 0.675%, down from August 26 close of 0.687%;
    • 30-years is at 1.399% down from 1.406%
    • 2-years yield is at 0.145% down from 0.153%
    • The 10-Year-&-2-Year spread is at 0.527 down from 0.534
  • VIX
    • Is at 23.32; up +0.05 from August 26 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 21 was a small green candle with almost no upper shadow and small lower shadow
    • Stochastic (9,1, 3): %K crossed below %D; above 90
    • RSI (9) is rising and near 70
  • The week was up +24.31 or +0.7%; the 5-week ATR is 67.22
  • The weekly week pivot point=3383.94, R1=3413.18, R2=3429.21; S1=3367.91, S2=3338.67; R1 pivot level was breached
  • An up week; fourth in last five weeks and eight in last ten weeks
  • Made an all-time high of 3393.96, breaking above the last swing high of 3393.52 made during the week of February 17; last swing low 2965.66 made during the week of June 15
  • Above 10-week EMA, 39-week SMA and 89-week SMA
  • Uptrend since March 23
Daily
  • A green candle that gapped up at the open with almost no upper and lower shadows; all-time intraday and closing highs
    • %K is crossing below %D; above 90
    • RSI-9 is above 80; 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 to down since the high made at 4:00 PM on Wednesday; moving up since 8:00 AM on August 21; Moving up since 10:00 AM on July 30; broke above a descending triangle at 6:00 AM on August 3;
    • RSI-21 moving down from above 85 since 4:00 PM
    • %K is below %D below 50;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving sideways since 2:00 PM on Wednesday; broke above an ascending triangle at 6:00 PM on August 24; 161.8% extension target near 3475.50 is achieved
    • RSI-21 moving down from above 75 at 1:30 PM to near 50 after making a Bearish Divergence
    • %K crisscrossing %D
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down since 6:45 PM
  • The Bollinger Band narrowing since 9:15 PM
    • Stochastic (9, 1, 3): %K is crisscrossing %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Wednesday, August 26 in mostly lower volume. Russell 2000 and Dow Jones Transportation Average closed down. S&P 500 and NASDAQ Composite traded in higher volume and also made all-time closing and intraday highs.

From Briefing.com:

The S&P 500 (+1.0%) and Nasdaq Composite (+1.7%) rallied to fresh record highs on Wednesday, propelled higher by some eye-popping gains in the mega-cap stocks. The Dow Jones Industrial Average increased just 0.3%, while the Russell 2000 was left in the dust with a 0.7% decline. […]

Consequently, today’s leadership came from the S&P 500 communication services (+3.7%), information technology (+2.1%), and consumer discretionary (+1.5%) sectors, which are home to many of the mega-caps. In the afternoon, the gains broadened out to the materials (+1.0%), industrials (+0.1%), and consumer staples (+0.1%) sectors.

[…]

U.S. Treasuries finished the day little changed. The 2-yr yield decreased one basis point to 0.15%, and the 10-yr yield increased one basis point to 0.69%. The U.S. Dollar Index declined 0.1% to 92.91. WTI crude futures increased by 0.1% to $43.39/bbl.

[…]
  • New orders for durable goods increased 11.2% m/m in July (Briefing.com consensus +3.9%) from an upwardly revised 7.7% (from 7.6%) in June. Excluding transportation, new orders jumped 2.4% m/m (Briefing.com consensus +1.8%) following an upwardly revised 4.0% increase (from 3.6%) in June.
    • The key takeaway from the report is that increased orders were seen across the manufacturing complex (other than nondefense aircraft and parts), underscoring a recovery-minded disposition in the wake of the COVID shutdown period.
  • The weekly MBA Mortgage Applications Index declined 6.5% following a 3.3% decrease in the prior week.
[…]
  • Nasdaq Composite +30.0% YTD
  • S&P 500 +7.7% YTD
  • Dow Jones Industrial Average -0.7% YTD
  • Russell 2000 -6.5% YTD

..NYSE Adv/Dec 1158/1809. ..NASDAQ Adv/Dec 1432/1910.
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