Morning Notes – Tuesday April 7, 2020

/ April 7, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up day; high volatility – watch for break above 2745.00 and below 2705.00 for more clarity
  • Key economic data due:
    • JOLTS Jobs Openings (est. 6.55M; prev. 6.96M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2710.89, 2676.85 and 2634.05
  • Critical resistance levels for S&P 500 are 2759.22, 2782.06 and 2804.21
  • Key levels for eMini futures: break above 2745.00, the high of 6:00 AM and break below 2705.25, the low of 5:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P future (June 2020) closed at 2646.75 and the index closed at 2663.68 – a spread of about -17.00 points; futures closed at 2644.50 for the day; the fair value is +2.25
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +77.75; Dow by +754 and NASDAQ by +224.75

Markets Around The World

  • Markets in the East closed mostly higher – Sydney was down
  • European markets are higher
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.676%, up from April 3 close of 0.587%;
    • 30-years is at 1.284%, up from 1.214%
    • 2-years yield is at 0.268% up from 0.225%
    • The 10-Year-&-2-Year spread is at 0.408 up from 0.362
  • VIX
    • Is at 44.01 down -1.23 from April 6 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:

Monthly
  • 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
Weekly:
  • 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
Daily
  • A relatively large green candle that gapped up with almost no lower shadow and very small upper shadow; breaking above congestion area created in last few days of March;
    • forming an ABCD pattern with a potential 61.8% extension target near 2725.00 (which may happen today); 100% extension target is near 2897.00
    • %K crossing above %D above 90
    • RSI-9 is rising above 50; above 8-day RSI;
  • Above 20-day EMA; below 50-day EMA, 100-day SMA and 200-day SMA;
  • In Correction
2-Hour (e-mini future)
  • Breaking above the horizontal channel that it formed from March 25 to April 6 between 2445.00 and 2635.00; approaching the 61.8% extension target near 2750; the 100% extension target is near 2825.00
    • also breaking above a bigger horizontal channel – from March 11 to April 6 between 2650.00 and 2174.00; the 61.8% extension target is near 2944.00 and 100% extension target is near 3126.00
    • RSI-21 rising since 10:00 PM after a small dip; above 80
    • %K is crisscrossing %D above 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Uptrend since 2:00 PM on April 3 from 2449.00; higher highs and higher lows
    • RSI-21 moving around 65 since 8:30 PM on Sunday
    • %K is crisscrossing %D above 80
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 9:45 AM on Monday
  • The Bollinger Band was relatively till 1:30 AM; expanding since with price walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D above 80
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday, April 6 in higher volume. Indices gapped up at the open and then mostly traded higher. Other global exchanges also closed up. All S&P sectors closed higher.

From Briefing.com:

The stock market rallied more than 7% to start the shortened trading week, as sentiment was buoyed by encouraging signs that the COVID-19 outbreak may be improving. The Dow Jones Industrial Average (+7.7%) and Russell 2000 (+8.2%) set the pace, followed by the Nasdaq Composite (+7.3%) and S&P 500 (+7.0%).

[…]

The market closed at session highs with the 11 S&P 500 sectors advancing between 3.9% (consumer staples) and 8.8% (information technology).

[…]

U.S. Treasuries started the week on a lower note amid the risk-on mindset displayed in the stock market. The 2-yr yield increased eight basis points to 0.27%, and the 10-yr yield increased nine basis points to 0.68%. The U.S. Dollar Index increased 0.2% to 100.73.

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