Morning Notes – Monday May 5, 2020

Directional Bias For The Day:

  • S&P Futures are lower; trending sideways to up since 8:30 PM
  • The odds are for a down day with good chance of sideways to up move from pre-open levels around 2800.00 – watch for break above 2821.50 for change of fortune
  • Key economic data due:
    • Factory Orders ( -9.2% est.; prev.0.0% ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2791.76, 2775.95 and 2762.46
  • Critical resistance levels for S&P 500 are 2821.90, 2839.67 and 2857.08
  • Key levels for eMini futures: break above 2812.75, the high of 3:00 AM and break below 2783.50, the low of 5:00 AM


  • On Friday at 4:00 PM, S&P future (June 2020) closed at 2824.25 and the index closed at 2830.71 – a spread of about -6.50 points; futures closed at 2821.75 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -19.25; Dow by -242 and NASDAQ by -47.50

Markets Around The World

  • Markets in the East were mostly down – Sydney was up; Shanghai and Tokyo were closed for trading
  • European markets are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • INR/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Crude Oil
    • Copper
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.632%, down from May 1 close of 0.642%;
    • 30-years is at 1.271%, down from 1.278%
    • 2-years yield is at 0.192% down from 0.200%
    • The 10-Year-&-2-Year spread is at 0.440 down from 0.442
  • VIX
    • Is at 39.17 up +1.98 from May 1 close; above 5-day SMA;
    • Down from all time high of 85.47 on March 18; recent high 47.77 on April 21, recent low 30.54 on April 28
    • Risk-Off

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

  • Uptrend under pressure
  • April 2020 was a large green candle with small upper and lower shadows; index advanced +12.7% following a decline of 12.5% in March;
    • Stochastic %K is crossing above %D and near 60; %K Bearish Divergence in January
    • RSI-9 turning up after declining to 34.91, the lowest level since April 2009, from above 75 in January and ; Bearish Divergence
    • Regaining the lower band of the 120-month regression channel to middle of the band; only third break below since 2009 but first close below it
  • Sequence of higher highs and higher lows broken
  • The week ending on May 1 was a small red candle with long upper shadow and small lower shadow and looking like an inverted hammer at the top;
    • Stochastic (9,1, 3): %K is above %D above 60
    • RSI (9) is turning down; near 50
  • The week was down -6.03 or -0.2%; the 5-week ATR is 192.52
  • Last week’s pivot point=2869.06, R1=2916.51, R2=3003.31; S1=2783.26, S2=2735.81; R1/R2 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 2193.81, the high during the week of August 15, 2016; sequence of higher highs and higher lows broken
  • Above 10-week EMA; below 39-week SMA, and 89-week SMA
  • In Correction
  • A red candle that gapped down at the open with no upper shadow and small lower shadow; a three-day Evening Star is completed
    • %K is below %D from above 90; potential Bearish Divergence
    • RSI-9 turning down; moving up in zig-zag manner; just above 50; below 8-day RSI;
  • Above 20-day EMA; at/above 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (e-mini future)
  • Moving down since 12:00 AM on April 30; up trending since March 23; sequence of higher highs and higher lows since April 21, the third such sequence since the uptrend started; broke below a shallower uptrend line from March 23 lows
    • RSI-21 rising since 6:00 PM on Sunday from near 15 to near 40
    • %K is crisscrossing %D higher from near 0
  • Below EMA10 of EMA50, which is below EMA20
  • Bias: Up-Side
30-Minute (e-mini future)
  • Trending down since 12:00 AM on April 30 after making a Double Top; moving sideways since 11:00 PM; rising since 8:45 PM and a brief throwback at 5:30 AM
    • RSI-21 rising since 8:30 PM after making a Bullish Divergence near 25; just below 50
    • %K is above %D;
  • At/above EMA20; below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving sideways since 12:45 AM; near the upper bound of a symmetrical triangle
  • The Bollinger Band is relatively narrow since 12:45 AM
    • Stochastic (9, 1, 3): %K is crisscrossing %D
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Friday, May 1 in mixed volume. The indices gapped down and then mostly traded lower. Most closed near the day’s lows and completed three-day Evening Star pattern. S&P 500 and NASDAQ Composite traded in higher volume.

For the week, major U.S. indices closed mixed. S&P 500, Dow Jones Industrial Average and NASDAQ Composite closed down in mostly higher volume. Russell 2000, Dow Jones Transportation Average, NYSE Composite and Wilshire 5000 Total Market Index closed higher. NASDAQ Composite traded in lower volume.

Global indices closed higher for the week. Dollar Index was down, crude oil was up, gold and copper were down and Treasury yields were up for the week.


The S&P 500 declined 2.8% on Friday, as investors increased profit-taking efforts after Amazon (AMZN 2286.04, -187.96, -7.6%) underwhelmed investors with its earnings report and U.S.-China tensions appeared to escalate. The Dow Jones Industrial Average lost 2.6%, the Nasdaq Composite lost 3.2%, and the Russell 2000 lost 3.8%.


All 11 S&P 500 sectors opened and closed in negative territory. The energy (-6.0%) and consumer discretionary (-4.6%) sectors took the biggest hits, while the consumer staples sector (-1.2%) declined the least.


U.S. Treasuries saw modest selling pressure despite the weakness in equities. The 2-yr yield and the 10-yr yield increased two basis points each to 0.20% and 0.64%, respectively. The U.S. Dollar Index finished little changed at 99.03. WTI crude increased 6.4%, or $1.19, to $19.77/bbl.


• The ISM Manufacturing index for April registered a 41.5% reading ( consensus 39.0%), marking the lowest level since April 2009. The headline number was better than expected, but when you look within the report, it was mostly bad.
o The key takeaway from the report is that the better-than-expected reading was a function of a sizable uptick in the index for supplier deliveries (to 76.0% from 65.0%) that is the result of supply chain disruptions and an uptick in the index for inventories (to 49.7% from 46.9%), which is really an indication of weak demand as inventory is sitting around longer because of weak demand.
• Total construction spending increased 0.9% m/m in March ( consensus -3.5%) on the heels of a downwardly revised 2.5% decline (from -1.3%) in February. Residential spending was up 2.3% m/m while nonresidential spending declined 0.1% m/m.
o The key takeaway from the report is that it is dated. It’s nice to see that things held up reasonably well in March, but the enthusiasm for the increase in construction spending should be mitigated by the expectation that it is unlikely to be repeated in April.

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