Morning Notes – Wednesday February 26, 2020

Directional Bias For The Day:

  • S&P Futures are higher; bouncing off since 4:00 AM from oversold levels; up more than 50 points
  • The odds are for an up to sideways day with elevated volatility; watch for break below 3122.25 for change of fortune
  • Key economic data due:
    • New Home Saes ( est. 714K; prev. 694K ) at 10:00 AM
    • &P/CS Composite-20 HPI ( 2.85% vs. 2.8% est.; prev. 2.6%) at 9:00 AM
    • CB Consumer Confidence ( est. 132.6 ; prev. 131.6) at 10:00 AM
    • Richmond Fed Manufacturing Index ( est. 10; prev. 10) at 10:00 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Uptrend Under Pressure
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 15-Min: Side
  • 6-Min: Side-Up

Key Levels:

  • Critical support levels for S&P 500 are 3118.77, 3108.40 and 3102.53
  • Critical resistance levels for S&P 500 are 3141.44, 3156.88 and 3177.22
  • Key levels for eMini futures: break above 3149.75, the high of 8:30 AM and break below 3122.25, the low of 7:30 AM


  • On Tuesday, at 4:00 PM, S&P future (March 2020) closed at 3127.75 and the index closed at 3128.21 – a spread of about -0.50 points; futures closed at 3132.50 for the day; the fair value is -4.75
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +6.00; Dow by +42 and NASDAQ by +30.75

Markets Around The World

  • Markets in the East closed lower;
  • European markets are mostly lower – Spain and Italy are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Palladium
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.364%, down from February 24 close of 1.377%;
    • 30-years is at 1.849%, up from 1.837%
    • 2-years yield is at 1.186%, down from 1.252%
    • The 10-Year-&-2-Year spread is at 0.178 up from 0.125
  • VIX
    • Is at 25.79 down -2.06 from February 25 close; above 5-day SMA;
    • Next high resistance is 30.25, the high of February 25; the low support is the lower high of the gap at 18.88, the high of February 3

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

  • Uptrend
  • January 2020 was a red shooting star like candle with long upper shadow and almost no lower shadow
    • Stochastic %K turned below %D from above 90
    • RSI-9 is above a downtrend line from January 2018 high; turning down just above 70
    • At the upper band from near the middle band of the 120-month regression channel
  • Sequence of higher highs and higher lows since February 2016 was broken in December 2018 but has resumed since then
  • The week ending on February 21 was a red harami candle with small lower shadow and upper shadow almost equal to the real body,. which was half the size of previous week’s real body
    • Stochastic (9,1, 3): %K crossed below %D; potential Bearish Divergence
    • RSI (9) has turned down from near 75; potential Bearish Divergence
  • Last week was down -42.41 or -1.3%; the 5-week ATR is 78.37
    Last week’s pivot point=3353.24, R1=3378.03, R2=3418.31; S1=3312.96, S2=3288.17; S1 pivot levels was breached
  • A down week following two up weeks; third in last five weeks and fourth in last ten weeks
  • Near all time highs; Last swing low, 2822.12, was the low on August 5, 2019; last swing high was 3027.98, made during the week of July 22, 2019
  • Above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend
  • A large red candle with small upper and lower shadows; next support is at 3070.33, the low of December 3
    • %K is below %D; below 10 following Bearish Divergence
    • RSI-9 has moved below 20; below 8-day SMA;
  • Below 20-day EMA, 50-day EMA and 100-day SMA; above 200-day SMA;
  • Uptrend under pressure
2-Hour (e-mini future)
  • Moving sideways – with sharp changes in direction – since 2:00 PM on Tuesday; range is large – between 3160.00 and 3090.00;  the support is near 3069.00, the low of December 3
    • RSI-21 is bouncing up from near 10; made Bullish Divergence at 4:00 AM’ nearing 40
    • %K is above %D since 4:00 AM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways since 2:00 PM on Tuesday with extreme volatility;
    • RSI-21 is moving up since 2:00 PM from near 20; made Bullish Divergence at 4:00 AM
    • %K is above %D since 4:00 AM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways since 7:45 PM on February 25;
  • The Bollinger Band narrowed from 7:45 PM to 3:30 AM; expanding since with price first walking down the lower band till 4:15 AM and then moving up to the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D higher from near 50
  • Bias: Side

Previous Session

Major U.S. indices closed sharply lower on Tuesday, February 25 in higher volume for the second day. Indices bounced up at the open but it did not last and they reversed course in the first half hour of trading and traded down for the rest of the day and closed near day’s lows. Dow Jones Industrial Average breached the lows of December and others are nearing their December lows. NASDAQ Composite is holding better relatively though it too has breached the lows of January.


U.S. stocks sold off again on Tuesday, as the global spread of the coronavirus continued to undermine growth expectations and exacerbate the flight for safety in Treasuries. The Nasdaq Composite (-2.8%) turned negative for the year while the S&P 500 (-3.0%), Dow Jones Industrial Average (-3.2%), and Russell 2000 (-3.5%) dropped at least 3.0%.


All 11 S&P 500 sectors finished with steep losses ranging from 1.8% (consumer staples) to 4.3% (energy).


Elsewhere, the rally in U.S. Treasuries persisted amid the underlying growth concerns. The 2-yr yield fell six basis points to 1.20%, and the 10-yr yield fell five basis points 1.33% after setting a record low at 1.31%. The U.S. Dollar Index fell 0.4% to 98.96. WTI crude fell back below $50 per barrel, closing the session down 2.7%, or $1.36, at $49.89/bbl.


• The Conference Board’s Consumer Confidence Index increased to 130.7 in February ( consensus 132.0) from a revised 130.4 (from 131.6) in January.
o The key takeaway from the report is that it did not show a significant change in sentiment when factoring in the revision to the January reading.
• The S&P Case-Shiller Home Price Index increased 2.9% in December ( consensus 3.2%).
• The FHFA Housing Price Index increased 0.6% in December.

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