Morning Notes – Tuesday May 5, 2020

Directional Bias For The Day:

  • S&P Futures are higher; trending up since 8:45 PM on Sunday; new leg since 5:00 AM
  • The odds are for an up day with good chance of sideways to up move from pre-open levels around 2860.00 – watch for break below 2832.50 for change of fortune
  • Key economic data due:
    • Trade Balance ( -44.4B vs. -41.0B est.; prev. -39.8B ) at 8:30 AM
    • Final Services PMI ( 27.0 est.; prev. 27.0) at 9:45 AM
    • ISM Non-Manufacturing PMI ( 37.5 est.; prev. 52.5) at 10:00 AM
    • IBD/TIPP Economic Optimism ( 35.s est.; prev. 47.8)

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2844.24, 2817.12 and 2808.53
  • Critical resistance levels for S&P 500 are 2869.09, 2892.47 and 2917.80
  • Key levels for eMini futures: break above 2865.00, the high of 4:00 AM and break below 2832.50, the low of 5:00 AM


  • On Monday at 4:00 PM, S&P future (June 2020) closed at 2833.00 and the index closed at 2842.74 – a spread of about -9.75 points; futures closed at 2825.25 for the day; the fair value is +7.75
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +36.25; Dow by +305 and NASDAQ by +119.00

Markets Around The World

  • Markets in the East were mostly up – Mumbai was down; Shanghai, Tokyo and Seoul were closed for trading
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • INR/USD
    • EUR/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Palladium
  • Bond
    • 10-yrs yield closed at 0.637%, down from May 1 close of 0.642%;
    • 30-years is at 1.297%, up from 1.278%
    • 2-years yield is at 0.188% down from 0.200%
    • The 10-Year-&-2-Year spread is at 0.449 up from 0.442
  • VIX
    • Is at 34.17 down -1.80 from May 4 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
    • Sentiment: Risk-On

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 green candle that gapped down at the open but then closed the gap; ended the day near the middle of previous day’s real body; almost no upper shadow and small lower shadow; like a Piercing candle, which is bullish, or a Thrusting Pattern, which is bearish
    • %K is below %D; potential Bearish Divergence on April 29
    • RSI-9 just above 50; moving up in zig-zag manner; 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 up since 8:00 PM on Sunday after moving down from 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 above 80
  • Above EMA20; at/below EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Trending up since 8:30 PM on May 3 after a Bullish Divergence; near a congestion / resistance area
    • RSI-21 rose above 65 by 4:00 AM after making a Bullish Divergence near 25 on Sunday evening; declined to 40 and now near 60
    • %K is above %D since 5:00 AM
  • At/above EMA20; below EMA10 of EMA50
  • Bias: Down-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 2:00 AM on Monday;
  • The Bollinger Band is relatively narrow since Sunday evening
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Down-Up

Previous Session

Major U.S. indices closed mostly higher on Monday, May 4 in mostly lower volume. Dow Jones Transportation Average and NYSE Composite closed lower. DJT was the only one to trade in higher volume. Indices gapped down at the open and then mostly traded higher after the morning session. Most closed near the high of the day switching the short-term bias to the upside.


The S&P 500 advanced 0.4% on Monday, closing near session highs, as strength in the mega-cap technology stocks helped the market overcome an increase in U.S.-China tensions and cautious commentary from Warren Buffett.

The tech-sensitive Nasdaq Composite rose 1.2% to climb past the benchmark index, Dow Jones Industrial Average (+0.1%), and Russell 2000 (+0.3%).


Eight of the 11 S&P 500 sectors finished in positive territory, paced by the energy (+3.7%) and information technology (+1.4%) sectors. The industrials (-1.3%) and financials (-0.9%) sectors lagged the broader market.


U.S. Treasuries posted small gains to begin the week, pushing yields slightly lower. The 2-yr yield declined three basis points to 0.17%, and the 10-yr yield declined one basis point to 0.64%. The U.S. Dollar Index increased 0.5% to 99.54. WTI crude increased 3.0%, or $0.60, to $20.37/bbl.

Monday’s economic data was limited to the Factory Orders report, which declined 10.3 m/m in March ( consensus -9.1%) following a downwardly revised 0.1% decline (from 0.0%) in February.
• The key takeaway from the report is that it shows how quickly manufacturing activity dropped off as shutdown initiatives increased. That drop off should be even more pronounced in April.

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