Morning Notes – Wednesday May 6, 2020

Directional Bias For The Day:

  • S&P Futures are higher; fluctuating between 2886.00 and 2865.00 since 1:00 AM
  • Double Top on 30-Minute and 15-Minute chart
  • The odds are for a sideways to down day, from pre-open levels around 2875.00, with elevated volatility – watch for break above 2886.25 for change of fortune
  • Key economic data due:
    • ADP Non-Farm Employment Change ( -20236K vs. -20500K est.; prev. -149K ) at 8:15 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 2863.55, 2844.24 and 2817.12
  • Critical resistance levels for S&P 500 are 2887.51, 2897.84 and 2917.80
  • Key levels for eMini futures: break above 2886.25, the high of 6:00 AM and break below 2865.25, the low of 8:30 AM


  • On Tuesday at 4:00 PM, S&P future (June 2020) closed at 2858.75 and the index closed at 2868.44 – a spread of about -9.75 points; futures closed at 2858.25 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +8.25; Dow by +68 and NASDAQ by +36.75

Markets Around The World

  • Markets in the East were mostly up – Sydney was down; Tokyo was closed for trading
  • European markets are mixed – U.K., Italy, Switzerland and STOXX 600 are up Germany, France and Spain are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • INR/USD
  • Commodities:
    Up Down
    • Silver
    • Copper
    • Cotton
    • Crude Oil
    • NatGas
    • Gold
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.698%, up from May 5 close of 0.657%;
    • 30-years is at 1.375%, up from 1.330%
    • 2-years yield is at 0.196% up from 0.176%
    • The 10-Year-&-2-Year spread is at 0.502 up from 0.481
  • VIX
    • Is at 32.33 down -1.28 from May 5 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 Gravestone Doji that gapped up at the open and moved higher but then gave up a large portion of gains in the last hour of trading; near a resistance area
    • %K is crossing above %D;
    • RSI-9 above 50; moving up in zig-zag manner; below 8-day RSI;
  • Above 20-day EMA; 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 May 3 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
    • emerging Cup-With-Handle pattern with handle below the top; break above 2889.75 will complete the pattern
    • RSI-21 rising from near 50 at 10:00 PM to above 65
    • %K is above %D; near 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Trending up since 8:30 PM on May 3 after a Bullish Divergence;
    • a smaller Cup-With-Handle pattern is emerging within a bigger one on 2-hour chart; break above 2885.75 will complete the pattern
    • Broke below the intermediate low of a Double Top pattern at 8:00 AM but then climbed up
    • RSI-21 above 60; above 40 since 5:00 AM on May 4
    • %K is below %D; potential Bearish Divergence at 6:30 AM
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moving up since 1:00 AM;
  • The Bollinger Band is relatively narrowing since 6:00 AM
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Tuesday, May 5 in mixed volume. Dow Jones Transportation Average and S&P 500 traded in lower volume. Indices gapped higher at the open and then moved higher. However, they gave a major portion of gain in the last hour of trading and closed near the lows.


The S&P 500 rallied as much as 2.0% on Tuesday, as investors continued to buy into the reopening narrative, but stocks pared gains late in the day to leave the benchmark index up 0.9% for the session. The Nasdaq Composite increased 1.1%, the Dow Jones Industrial Average increased 0.6%, and the Russell 2000 increased 0.8%.


The S&P 500 financials sector (-0.1%) slipped into negative territory amid the late-session decline, while the health care sector (+2.2%) was minimally affected. The reopening enthusiasm still buoyed oil prices ($24.53/bbl, +4.16, +20.4%) by 20% amid expectations for a demand recovery.


U.S. Treasuries ended the session little changed. The 2-yr yield was unchanged at 0.17%, and the 10-yr yield increased two basis points to 0.66%. The U.S. Dollar Index increased 0.3% to 99.78.


• The ISM Non-Manufacturing Index for April dropped to 41.8% ( consensus 38.5%) from 52.5% in March. A number below 50.0% is indicative of contraction. The April reading was the lowest reading for the index since March 2009.
o The key takeaway from the report is that, like the ISM Manufacturing Index, it was not as “good” as the headline number suggests given that there was a spike in the Supplier Deliveries Index (to all-time high 78.3% from 62.1%), which is largely indicative of supply problems due to the COVID-19 impact.
• The Trade Balance report for March showed a widening in the deficit to $44.4 billion ( consensus -$44.2 billion) from an upwardly revised $39.8 billion (from -$39.9 billion) for February. Exports were down $20.0 billion from February while imports were down $15.4 billion.
o The widening in the deficit was the result of exports declining more than imports, yet the key takeaway is that the large declines in both reflect weak trade activity in the wake of COVID-19 shutdown issues that only got worse in April.

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