Morning Notes – Friday August 7, 2020

Directional Bias For The Day:

  • S&P Futures are lower;
  • The odds are for a sideways to down day with elevated volatility – watch for a break above 3345.50 and below 3323.25 for clarity
  • Key economic data due:
    • Non-Farm Employment Change ( 1763K vs. 1530K est.; prev. 4791K) at 8:30 AM
    • Unemployment Rate ( 0.2% vs. 10.5% est.; prev. 11.1% ) at 8:30 AM
    • Average Hourly Earnings ( 0.2% vs. -0.5% est. ; prev. -1.3%) at 8:30 AM
    • Final Wholesale Inventories ( -2.0% est.; prev. -2.0% ) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3332.91, 3318.14 and 3301.52
  • Critical resistance levels for S&P 500 are 3351.03, 3360.76, and 3375.05
  • Key levels for E-mini futures: break above 3345.50, the high of 8:30 AM and break below 3323.25, the low of 5:15 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3342.50 and the index closed at 3349.16 – a spread of about -6.75 points; futures closed at 3344.25 for the day; the fair value is -1.75
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -11.25; Dow by -55 and NASDAQ by -43.00

Markets Around The World

  • Markets in East closed mostly lower – Mumbai and Seoul were up;
  • European markets are mixed – Germany, U.K., Switzerland, and STOXX 600 are higher; France, Spain, and Italy are lower
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Sugar
    • Coffee
    • Cocoa
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
    • Cotton
  • Bond
    • 10-yrs yield is  at 0.543%, up from August 6 close of 0.536%;
    • 30-years is at 1.207% up from 1.201%
    • 2-years yield is at 0.117% down from 0.121%
    • The 10-Year-&-2-Year spread is at 0.426 up from 0.415
  • VIX
    • Is at 23.64; up +0.99 from August 6 close; at/below 5-day SMA;
    • Recent high 33.67 on July 14; low 20.97 on August 6
    • 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 31 was a green Bullish Engulfing candle with small upper and lower shadows
    • Stochastic (9,1, 3): %K is above %D; above 90
    • RSI (9) is rising above 60
  • The week was up +55.49 or +1.7%; the 5-week ATR is 99.16 – first less than 100 points weekly range since February
  • The weekly week pivot point =3249.14, R1=3294.15, R2=3317.18; S1=3226.11, S2=3181.10; R1 pivot level was breached
  • An up week; fourth in last five weeks and seventh 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 resumed
Daily
  • A relatively small green candle that looks like Bullish Engulfing formation with almost no upper and lower shadows; breaking above a resistance level and closing the gap created on February 24
    • %K above %D; above 90
    • RSI-9 is rising toward 75; above 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 up since 10:00 AM on July 30; broke above a descending triangle at 6:00 AM on August 3; 100% extension target near 3337.00 is achieved and 1.618% extension target is near 3376.00
    • RSI-21 declining since 2:00 PM on Thursday after making Bearish Divergence
    • %K is crisscrossing %D above 90;
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • Trending sideways to down 4:00 PM on Thursday; since 12:30 PM on July 31; breaking above a downtrend line from 8:00 PM high
    • RSI-21 moving down since 4:30 PM from above 65; just above 50
    • %K is crisscrossing %D;
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) sloping down since 6:45 PM on Thursday
  • The Bollinger Band is relatively stable
    • Stochastic (9, 1, 3): %K is below %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly higher on Thursday, August 6 in mixed volume. Russell 2000 and NYSE Composite closed lower. Dow Jones Industrial Average and Russell 2000 traded in lower volume.

From Briefing.com:

The mega-cap stocks did the heavy lifting on Thursday, powering the Nasdaq Composite (+1.0%) to another record close and leaving the S&P 500 (+0.6%) within 1.5% of its all-time high. The Dow Jones Industrial Average gained 0.7%, while the small-cap Russell 2000 declined 0.1%.

[…]

Unsurprisingly, the S&P 500 communication services (+2.5%), information technology (+1.5%), and consumer discretionary (+0.5%) sectors advanced the most today. On the other end were the energy (-0.7%), health care (-0.6%), materials (-0.4%), and financials (-0.2%) sectors in negative territory.

[…]

Outside equities, U.S. Treasuries finished little changed, oil prices ($41.95/bbl, -0.29, -0.7%) closed lower, and precious metals continued to rally. The 2-yr yield was flat at 0.11%, and the 10-yr yield declined one basis point to 0.54%. The U.S. Dollar Index declined 0.1% to 92.77. Gold futures rose 0.9% to $2068.80/ozt, and silver futures rose 5.5% to $28.37/ozt.

[…]
  • Initial claims for the week ending August 1 decreased by 249,000 to 1.186 million (Briefing.com consensus 1.400 million). Continuing claims for the week ending July 25 decreased by 844,000 to 16.107 million.
    • The key takeaway from the report is that initial claims were much better than expected, which is eye candy to a stock market moving up on relative terms. The big picture takeaway, however, is that initial claims are still running in excess of 1.1 million. That’s not a good thing, as it underscores the continued perilous state of the labor market. In the same week a year ago, initial claims were 214,000.
[…]
  • Nasdaq Composite +23.8% YTD
  • S&P 500 +3.7% YTD
  • Dow Jones Industrial Average -4.0% YTD
  • Russell 2000 -7.4% YTD

..NYSE Adv/Dec 1458/1479. ..NASDAQ Adv/Dec 1492/1765.

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