Morning Notes – Friday September 4, 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 3484.25 and below 3435.75 for clarity
  • Key economic data due:
    • Non-Farm Employment Change ( 1371K vs. 1375K est.; prev. 1763K) at 8:30 AM
    • Unemployment Rate ( 8.4% vs 9.8% est.; prev.10.2%) at 8:30 AM
    • Average Hourly Earnings ( 0.4% vs. 0.0% est.; prev. 0.2%) at 8:30 AM

Directional Bias Before Open:

  • Weekly: Uptrend
  • Daily: Uptrend Under Pressure
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: Side-Down

Key Levels:

  • Critical support levels for S&P 500 are 3427.41, 3413.13, and 3399.43
  • Critical resistance levels for S&P 500 are 3459.62, 3494.67, and 3528.03
  • Key levels for E-mini futures: break above 3484.25, the high of 6:00 AM and break below 3435.75, the low of 3:00 AM


  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3453.25 and the index closed at 3455.06 – a spread of about -1.75 points; futures closed at 3461.50 for the day; the fair value is -8.25
  • Pre-NYSE session open, futures are mixed – at 8:00 AM, S&P 500 futures were down by -7.25; Dow up by +50, and NASDAQ down by -135.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are mixed – Germany, Switzerland, and STOXX-600 are lower; U.K., France, Spain, and Italy are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Coffee
    • Cotton
    • Palladium
    • Sugar
    • Cocoa
  • Bond
    • 10-years yield closed at 0.622%, down from September 2 close of 0.651%;
    • 30-years is at 1.341% down from 1.375%
    • 2-years yield is at 0.133% down from 0.141%
    • The 10-Year-&-2-Year spread is at 0.489 down  from 0.510
  • VIX
    • Is at 32.30; down -1.30 from September 3 close; above 5-day SMA;
    • The recent high is 37.12 on June 14 and the low is 20.28 on August 11
    • Sentiment: Risk-Off

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

  • Uptrend Resumed
  • August 2020 was a green candle with almost small upper shadow and almost no lower shadow;
    • Stochastic %K is above %D and above 90; %K Bearish Divergence in January
    • RSI-9 rising near 70; breaking above a downtrend line from January 2018 high
    • Rising above the upper band of the 120-month regression channel for the first time after February 2020; broke below the lower channel in march 2020
  • The sequence of higher highs and higher lows is resumed
  • The week ending on August 28 was a relatively large green candle with almost no upper and lower shadows
    • Stochastic (9,1, 3): %K crisscrossing %D; above 90
    • RSI (9) is rising above 75
  • The week was up +110.85 or +3.3%; the 5-week ATR is 73.65
  • The weekly week pivot point=3476.79, R1=3540.45, R2=3572.89; S1=3444.35, S2=3380.69; R1/R2/R3 pivot levels were breached
  • An up week; fifth in the last five weeks and eight in last ten weeks
  • Made all-time closing and intraday highs; last swing low 2965.66 made during the week of June 15
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
  • A large red candle that opened lower and then traded down for the rest of the day; small lower shadow and almost no upper shadow;
    • %K is below %D; declined from above 90 to near 20; %D Bearish Divergence
    • RSI-9 decline from near 90 to just above 50; below 8-day RSI
  • At 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Declined from an all-time high of 3587.00 to 3424.50 after a brief sideways move; bouncing off from lows made near the close of the NYSE session
    • RSI-21 up from 16.41 at 2:00 PM to just above 40
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (E-mini futures)
  • Moving sideways to down after breaking below a resistance level around 3480.00;
    • RSI-21 rising since 11:30 AM on Thursday; made a Bullish Divergence at 3:00 PM
    • %K is below %D from above 80
  • At/below EMA20, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways to up since 6:00 PM
  • The Bollinger Band narrowed from 6:00 PM to 3:15 AM; expanding since with price first walking up the upper band and then declining to the lower band
    • Stochastic (9, 1, 3): %K is crisscrossing %D below 20
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Thursday, September 3 in higher volume. Most indices made Bearish Engulfing candlestick pattern. NASDAQ Composite made Evening Star pattern. All S&P sectors closed lower.


The S&P 500 dropped 3.5% on Thursday in an orderly retreat led by the mega-caps and growth stocks. The Nasdaq Composite underperformed with a 5.0% decline due to its greater exposure to these names, while the Dow Jones Industrial Average (-2.8%) and Russell 2000 (-3.0%) declined about 3%.


Losses were broad, evident by all 11 S&P 500 sectors closing in negative territory, but there was a relative divergence between the losers.

A bulk of the losses were found in the high-momentum stocks within the information technology (-5.8%) and consumer discretionary (-3.6%) sectors, which were the only sectors that declined more than the S&P 500. The Philadelphia Semiconductor Index fell 5.7%.


U.S. Treasuries ended the day on a higher note, as investors assumed some safety amid the weakness in stocks and lingering growth concerns. The 2-yr yield declined one basis point to 0.12%, and the 10-yr yield declined three basis points to 0.62%. The U.S. Dollar Index declined 0.1% to 92.73. WTI crude futures declined 0.5%, or $0.20, to $41.34/bbl.

  • Initial claims for the week ending August 29 decreased by 130,000 to 881,000 ( consensus 915,000), which is the lowest they have been since the week ending March 14. Continuing claims for the week ending August 22 decreased by 1,238,000 to 13.254 million.
    • The key takeaway from the report is that initial claims were the lowest they have been since the COVID pandemic hit the U.S. economy in force in mid-March. That has fostered some confidence in the view that, even with initial claims still alarmingly high, the economy continues to heal from that impact.
  • The ISM Non-Manufacturing index for August slipped to 56.9% ( consensus 56.7%) from 58.1% in July.
    • The key takeaway from the report is that it featured a notable slowing in the New Orders Index (56.8% from 67.7%) and a notable pickup in the Prices Index (64.2% from 57.6%).
  • Q2 Productivity growth was revised to an annualized 10.1% ( consensus 7.0%) from the advance estimate of 7.3%. Unit labor costs were up 9.0% ( consensus 12.6%) versus the advance estimate of 12.2%.
    • The key takeaway from the report is that the huge productivity gain (largest since Q1 1971) is only formulaic as opposed to a true picture of strength. To wit, output declined 37.1% (largest on record) while hours worked fell 42.9% (largest on record).
  • The July trade deficit widened to $63.6 billion ( consensus -$58.6 billion) from a downwardly revised $53.5 billion (from -$50.7 billion) in June. Exports were up $12.6 billion from June while imports were up $22.7 billion.
    • The key takeaway from the report is that exports and imports both rose, which is consistent with a global economy in recovery mode.
  • Nasdaq Composite +27.7% YTD
  • S&P 500 +6.9% YTD
  • Dow Jones Industrial Average -0.9% YTD
  • Russell 2000 -7.4% YTD

..NYSE Adv/Dec 585/2320. ..NASDAQ Adv/Dec 683/2436.

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