Morning Notes – Wednesday July 29, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideway day – watch for a break above 3236.50 and break below 3204.50 for clarity
  • Key economic data due:
    • Good Trade Balance ( -70.6B vs. -75.5B est.; prev. -74.3B) at 8:30 AM
    • Prelim Wholesale Inventories ( -2.0% vs. -0.4% est.; prev. -1.2% ) at 8:30 AM
    • Pending Home Sales ( 15.6% est.; prev. 44.3%) at 10:00 AM
    • FOMC Statement at 2:00 PM
    • Fed Funds Rate ( <0.25% est.; prev. <0.25% ) at 2:00 PM
    • FOMC Press Conference at 2:30 PM

Directional Bias Before Open:

  • Weekly: Uptrend since March 23 under pressure
  • Daily: Uptrend since March 23 resumed
  • 120-Min: Up-Side
  • 30-Min: Side-Down
  • 15-Min: Down-Side
  • 6-Min: Side

Key Levels:

  • Critical support levels for S&P 500 are 3216.17, 3204.88 and 3198.59
  • Critical resistance levels for S&P 500 are 3231.24, 3243.72 and 3278.42
  • Key levels for E-mini futures: break above 3223.50, the high of 3:30 AM and break below 3204.25, the low of 0:30 AM

Pre-Open

  • On Tuesday at 4:00 PM, S&P futures (September 2020) closed at 3211.75 and the index closed at 3218.44 – a spread of about -6.75 points; futures closed at 3213.00 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +11.50; Dow by +63 and NASDAQ by +71.50

Markets Around The World

  • Markets in East closed mixed – Shanghai, Hong Kong, and Seoul closed up; Tokyo, Sydney, Mumbai, and Singapore closed down
  • European markets are mostly lower – UK and France are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • Dollar index
    • USD/JPY
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Platinum
    • Palladium
    • Sugar
  • Bond
    • 10-yrs yield closed at 0.581%, down from July 27 close of 0.609%;
    • 30-years is at 1.223% down from 1.252%
    • 2-years yield is at 0.137% down from 0.158%
    • The 10-Year-&-2-Year spread is at 0.444 down from 0.451
  • VIX
    • Is at 25.14; down – 0.30 from July 28 close; below 5-day SMA;
    • Recent high 33.67 on July 14; low 23.61 on July 21
    • Sentiment: Risk-Neutral

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

Monthly
  • Uptrend under pressure
  • June 2020 was a green spinning candle with large¬† upper and lower shadows;
    • Stochastic %K is above %D and above 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 middle band of the 120-month regression channel after the third break of the channel since 2009 and first close below it
  • The sequence of higher highs and higher lows is broken
Weekly:
  • The week ending on July 24 was a small red real body candle with large upper shadow and small lower shadow
    • Stochastic (9,1, 3): %K is below %D;
    • RSI (9) is above 60
  • The week was down -9.10 or -0.3%; the 5-week ATR is 115.60
  • The weekly week pivot point =3231.89, R1=3263.73, R2=3311.83; S1=3183.79, S2=3151.95; R1 pivot level was breached
  • A down week; second in last five weeks and third in last ten weeks
  • The 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, 39-week SMA and 89-week SMA
  • Uptrend since March 23 is under pressure
Daily
  • A small red Harami like candlestick¬† with small lower and upper shadows;
    • %K below %D following a Bearish Divergence
    • RSI-9 is near 55; below 8-day RSI; Bearish Divergence
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23 resumed
2-Hour (E-mini futures)
  • Moving sideways since 2:00 PM on July 23; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 rising up from 50
    • %K is above %D
  • At/aboveEMA20, which is at/below EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Sideways move since 2:00 PM on July 23;
    • RSI-21 made Bullish Divergence at 3:00 AM; around 40
    • %K is below %D;
  • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to up since 9:00 PM
  • The Bollinger Band narrowed from 7:00 AM to 8″00 AM; expanding since
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Tuesday, July 28 in mixed volume. Dow Jones Transportation Average and S&P 50 traded in higher volume. For the past few days, major indices are moving mostly sideways.

From Briefing.com:

The S&P 500 declined 0.7% on Tuesday, pressured by some late selling and a cautious mindset ahead of numerous key events this week. The Dow Jones Industrial Average fell 0.8%, the Nasdaq Composite fell 1.3%, and the Russell 2000 fell 1.0%.

[…]

The mega-cap stocks accelerated losses into the close after finding renewed strength yesterday, joining stocks within the S&P 500 materials (-2.2%) and energy (-1.8%) sectors as today’s laggards. The defensive-oriented real estate (+2.1%), utilities (+1.6%), and consumer staples (+0.3%) sectors closed higher.

[…]

U.S. Treasuries finished with modest gains in front of the July FOMC statement tomorrow. The 2-yr yield declined one basis point to 0.14%, and the 10-yr yield declined three basis points to 0.58%. The U.S. Dollar Index increased 0.1% to 93.77. WTI crude futures fell 1.4%, or $0.58, to $41.04/bbl.

[…]
  • The Conference Board’s Consumer Confidence Index slipped to 92.6 in July (Briefing.com consensus 95.0) from an upwardly revised 98.3 (from 98.1) in June, as reports detailing the resurgence of coronavirus cases and efforts to pause or roll back reopenings because of the resurgence weighed on consumer attitudes.
    • The key takeaway from the report is the recognition that consumers have gotten less optimistic about the short-term outlook and “remain subdued about their financial prospects,” which is a negative portent for consumer spending.
  • The S&P Case-Shiller Home Price Index for May increased 3.7% (Briefing.com consensus 4.1%) following a revised 3.9% increase in April (from +4.0%).
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