Morning Notes – Friday July 31, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for an up to sideways day – watch for a break below 3245.75 for change of sentiments
  • Key economic data due:
    • Core PCE Price Index ( 0.2% vs. 0.2% est.; prev. 0.1%) at 8:30 AM
    • Personal Spending ( 5.6% vs. 5.3% est.; prev. 8.2% ) at 8:30 AM
    • Employment Cost Index ( 0.5% vs. 0.6% est.; prev. 0.8%) at 8:30 AM
    • Personal Income ( -1.1% vs. -0.8% est,; prev. -4.2%) at 8:30 AM
    • Chicago PMI ( 44.0 est.; prev. 36.6) at 9:45 AM
    • Revised UoM Consumer Sentiment ( 72.9 est.; prev. 73.2) at 10:00 AM
    • Revised UoM Inflation Expectations ( prev. 3.1%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3239.10, 3204.13 and 3198.59
  • Critical resistance levels for S&P 500 are 3264.74, 3279.99, and 3295.92
  • Key levels for E-mini futures: break above 3263.50, the high of 4:30 AM and break below 3245.75, the low of 1:30 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3239.00 and the index closed at 3246.22 – a spread of about -7.25 points; futures closed at 3248.75 for the day; the fair value is -9.75
  • Pre-NYSE session open, futures are higher – at 8:30 AM, S&P 500 futures were up by +9.25; Dow by +40 and NASDAQ by -95.75

Markets Around The World

  • Markets in East closed mostly lower – Shanghai was up; Singapore was closed
  • European markets are mostly higher – U.K. and Spain are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • Dollar index
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Sugar
    • Coffee
    • Copper
    • Palladium
    • Cotton
    • Cocoa
  • Bond
    • 10-yrs yield closed at 0.541%, down from July 29 close of 0.579%;
    • 30-years is at 1.198% down from 1.242%
    • 2-years yield is at 0.121% down from 0.137%
    • The 10-Year-&-2-Year spread is at 0.420 down from 0.442
  • VIX
    • Is at 24.68; down -0.08 from July 30 close; at/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 green Hammer like candlestick with almost no upper shadow and lower bigger than the real body;
    • %K above %D turning down
    • RSI-9 is below 60; below 8-day RSI
  • 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 to up since 2:00 PM on July 23; declining from 3273.75 at 6:00 PM on Thursday; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 declining from above 65 after making a Bearish Divergence
    • %K is crisscrossing %D lower
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (E-mini futures)
  • Sideways move since 4:30 PM on Thursday;
    • RSI-21 made Bearish Divergence at 6:00 PM; just above 50
    • %K is below %D;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to down since 10:30 PM
  • The Bollinger Band is relatively stable since 10:30 PM
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly lower on Thursday, July 30 in mostly higher volume. NASDAQ Composite and Dow Jones Transportation Average closed up. Most S&P sectors closed lower.

From Briefing.com:

The S&P 500 declined as much as 1.7% on Thursday following the release of weak economic data, but a buy-the-dip trade in the mega-cap stocks helped the benchmark index close lower by just 0.4%. The Nasdaq Composite gained 0.4%, while the Dow Jones Industrial Average lost 0.9% and the Russell 2000 lost 0.4%.

[…]

The data appeared to take a toll on the cyclical energy (-4.1%), materials (-2.0%), and financials (-1.8%) sectors, but a turnaround in the mega-caps contributed to the gains in the information technology (+0.5%), communication services (+0.3%), and consumer discretionary (+0.1%) sectors.

[…]

U.S. Treasuries finished the day with modest gains amid today’s weak data. The 2-yr yield declined two basis points to 0.11%, and the 10-yr yield declined four basis points to 0.54%. The U.S. Dollar Index fell another 0.5% to 92.98. WTI crude futures fell 3.2%, or $1.30, to $39.97/bbl.

[…]
  • Second quarter GDP declined at an annualized rate of 32.9% (Briefing.com consensus -35.0%), which is the worst annualized quarterly decline on record.¬†The GDP Price Deflator declined 1.8% (Briefing.com consensus +0.1%).
    • The key takeaway from the report is its data-based rendering of just how bad things were in the second quarter amidst a self-imposed lockdown to contain the spread of the coronavirus and just how much ground needs to be made up to get back to pre-pandemic levels.
  • Initial claims for the week ending July 25 increased by 12,000 to 1.434 million (Briefing.com consensus 1.400 million). Continuing claims for the week ending July 18 surged by 867,000 to 17.018 million.
    • The key takeaway from this report is that initial claims are moving in the wrong direction (up, not down), signalling that the initial recovery momentum from the depths of the second quarter has slowed.
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