Morning Notes – Monday April 6, 2020

Directional Bias For The Day:

  • S&P Futures are higher; moving mostly sideways since 1:00 AM
  • The odds are for an up day; good odds for sideways move from pre-open levels; high volatility – watch for break above 2588.00 and below 2564.00 for more clarity
  • No key economic data due:

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Side
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for S&P 500 are 2538.18, 2497.10 and 2459.96
  • Critical resistance levels for S&P 500 are 2571.15, 2612.09 and 2641.39
  • Key levels for eMini futures: break above 2586.75, the high of 2:00 AM and break below 2564.00, the low of 8:00 AM


  • On Friday at 4:00 PM, S&P future (June 2020) closed at 2479.25 and the index closed at 2488.65 – a spread of about -9.25 points; futures closed at 2482.75 for the day; the fair value is -3.50
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +93.25; Dow by +748 and NASDAQ by +280.25

Markets Around The World

  • Markets in the East closed higher – Shanghai and Mumbai were closed
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Cotton
    • Cocoa
    • Crude Oil
    • Palladium
    • Coffee
  • Bond
    • 10-yrs yield is at 0.646%, up from April 3 close of 0.587%;
    • 30-years is at 1.267%, up from 1.214%
    • 2-years yield is at 0.264% up from 0.225%
    • The 10-Year-&-2-Year spread is at 0.382 up from 0.362
  • VIX
    • Is at 43.99 down -2.81 from April 3 close; below 5-day SMA;
    • Down from all time high of 85.47 on March 18

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

  • Uptrend under pressure
  • March 2020 was a large red top candle with large upper and lower shadows; index declined 12.5%;
    • Stochastic %K is below %D and near 30; %K Bearish Divergence
    • RSI-9 declined from above 75 to near 30; Bearish Divergence
    • Broke below the lower band of the 120-month regression channel to middle of the band; only third time since 2009 but first close below the lower bound
  • Sequence of higher highs and higher lows broken
  • The week ending on April 3 was a relatively small red candle with long upper and lower shadows
    • Stochastic (9,1, 3): %K is above %D near 20
    • RSI (9) is turning down; near 30
  • Last week was down -52.82 or -2.1%; the 5-week ATR is 359.65
  • Last week’s pivot point=2525.84, R1=2504.20, R2=2719.74; S1=2410.30, S2=2331.94; S1/R1 pivot levels were breached
  • A down week; third in last five weeks and sixth in last ten weeks
  • 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 the high of 2193.81 during the week of August 15, 2016; sequence of higher highs and higher lows broken
  • Below 10-week EMA and 39-week SMA, and 89-week SMA
  • In Correction
  • A red harami candle which was mostly within previous day’s real body; the high slightly breached previous day’s high
    • %K is below %D
    • RSI-9 is near 45; at/below 8-day RSI;
  • Below 20-day EMA; below 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Moving within a horizontal channel since 12:00 PM on March 25 between 2445.00 and 2635.00; rising from the lower bound since 2:00 PM on April 1 and retested at 8:00 AM on April 2
    • moving within a bigger horizontal channel since 10:00 PM on March 11 between 2650.00 and 2174.00, which has potential to become an uneven inverse Head-&-Shoulder pattern;
    • RSI-21 rising since 4:00 PM on March 31 from near 20; just below 65; Bullish Divergence at 8:00 AM on April 2
    • %K is crisscrossing %D above 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving up since 2:00 PM on Friday from 2449.00, near the lower bound of a horizontal trading channel between 2634.50 and 2445.00
    • RSI-21 above 40 since April1; between 50 and 65 since 6:00 PM on Sunday
    • %K is crisscrossing %D lower since 11:30 PM
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways since 1:30 AM
  • The Bollinger Band is relatively narrowing since 1:30 AM;
  • Stochastic (9, 1, 3): %K is crisscrossing %D lower since 5:45 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed lower on Friday, April 3 in mostly lower volume. Dow Jones Transportation Average traded in lower volume. Most indices made red harami candle. Russell 200 was an exception.

For the week, major U.S. indices closed down. Most international indices also closed lower. Sydney, Seoul and Switzerland closed up. All but three S&P sectors – Consumer Staples, Energy and Healthcare – closed lower.


The stock market ended a down week on a lower note, though the S&P 500 (-1.5%) was able to remain above its low from Wednesday. The benchmark index surrendered 2.1% for the week. Small caps had a more difficult go, as the Russell 2000 (-3.1%) lost 7.1% for the week, stopping a bit above its March low.


Ten out of eleven sectors ended in the red with six sectors logging wider losses than the broader market. Utilities (-3.6%), materials (-2.3%), and financials (-2.2%) were at the forefront of the selling while real estate (-0.8%) and consumer staples (+0.5%) outperformed.


Longer-dated Treasuries finished near their best levels of the day, sending the 10-yr yield lower by four basis points to 0.59%.
The U.S. Dollar Index climbed 0.4% to 100.61, gaining 2.2% for the week.


• March nonfarm payrolls declined by 701,000 ( consensus -150,000) while February nonfarm payrolls were revised to 275,000 from 273,000. March private sector payrolls declined by 713,000 ( consensus -250,000) while February private sector payrolls were revised to 242,000 from 228,000.
• March unemployment rate was 4.4% ( consensus 4.0%), versus 3.5% in February. Persons unemployed for 27 weeks or more accounted for 15.9% of the unemployed versus 19.2% in February. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 8.7%, versus 7.0% in February.
• March average hourly earnings were up 0.4% ( consensus +0.2%) after increasing 0.3% in February while average workweek decreased to 34.2 hours ( consensus 34.0) from 34.4 hours in February.
o The key takeaway from the report is that it still isn’t adequately capturing the full extent of the weakness in the labor market. Things are even worse than the headlines here suggest, as yesterday’s initial claims report made abundantly clear. Those filings are not embedded in today’s report, which was formulated mostly on the basis of an employment survey conducted the week of March 12. In actuality, the unemployment rate is likely closer to 10.0% at this juncture
• The ISM Non-Manufacturing Index for March checked in at 52.5% ( consensus 43.0%) versus 57.3% in February. The dividing line between expansion and contraction is 50.0%.
o The key takeaway from the report is that it’s not as encouraging as it appears to be, having been bolstered by a nice pickup in the Supplier Deliveries Index (to 62.1% from 52.4%), which reflects slower deliveries due to the COVID-19 impact; moreover, it is understood that the services sector has been the hardest hit in the sudden economic stop and that this measure does not adequately capture the real-time change in business conditions.

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