Morning Notes – Thursday October 22, 2020

/ October 22, 2020

Directional Bias For The Day:

  • S&P Futures are lower but moving up since 8:00 PM;
  • The odds are for an up to sideways day; the daily bias is down-to-sideways elevated volatility – watch for a break above 3450.75 and below 3417.75 for clarity
  • Key economic data report:
    • Unemployment Claims ( 787K vs 860K est.; prev.898K) at 8:30 AM
    • CB Leading Index (0.7% vs. 0.8% est.; prev. 1.4%) at 10:00 AM
    • Existing Home Sales (6.54M vs. 6.20M est.; prev. 5.98M) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3433.06, 3419.93, and 3396.39
  • Critical resistance levels for S&P 500 are 3456.01, 3464.86, and 3476.93
  • Key levels for E-mini futures: break above 3450.75, the high of 3:00 PM and break below 3417.75, the low of 6:00 AM

Pre-Open

  • On Wednesday at 4:00 PM, S&P futures (December 2020) closed at 3427.25 and the index closed at 3435.56 – a spread of about -8.25 points; futures closed at 3432.50 for the day; the fair value is -5.25
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -7.00; Dow by -56, and NASDAQ by -24.50

Markets Around The World

  • Markets in the East closed mostly lower – Hong Kong and Singapore closed up
  • European markets lower;
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • NZD/USD
    • USD/CHF
    • USD/CAD
    • INR/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
  • Bond
    • 10-years yield is at 821%, up from October 21 close of 0.816%;
    • 30-years is at 1.626% down from 1.629%
    • 2-years yield is at 0.143% unchanged
    • The 10-Year-&-2-Year spread is at 0.668 up from 0.663
  • VIX
    • Is at 29.21; up +0.56 from October 21 close; above 5-day SMA;
    • Recent high =  38.28 on September 4; low =  24.03 on October 9
    • Sentiment: Risk-Neutral to Off

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

Monthly
  • Uptrend
  • September 2020 was a red candle with long upper and lower shadows; made an all-time high
    • Stochastic %K crossing below %D from above 90; potential %D Bearish Divergence
    • RSI-9 turning down from near 70; falling below a downtrend line that it broke above in August
    • Retreating from the upper band of a 120-month regression channel;
  • The sequence of higher highs and higher lows is resumed
Weekly:
  • The week ending on October 16 was a red spinning top candle with large upper and lower shadows but small real body indicating indecision
    • Stochastic (9,1, 3): %K turning flat-to-down above %D;
    • RSI (9) turning flat-to-down near 66
  • The week was up + 6.68 or +0.2%; the 5-week ATR is 118.40
  • The weekly week pivot point=3491.52, R1=3542.14, R2=3600.48; S1=3433.18, S2=3382.56; R1 pivot level was breached
  • An up week; third in a row and in the last five weeks and sixth in last ten weeks
  • Above 10-week EMA, 39-week SMA, and 89-week SMA
  • Uptrend since March 23
Daily
  • A small red candle looking like a Gravestone doji; declining since October 12 in small steps
    • %K below %D; below 20
    • RSI-9 declining since October 12 from above 70 to below 60
  • At/above 20-day EMA; above 50-day EMA, 100-day, and 200-day SMA
  • Uptrend Under Pressure
2-Hour (E-mini futures)
  • Rising since 8:00 PM on Wednesday from the lower bound of a down-sloping flag that is forming since October 12
    • RSI-21 bouncing off 40 to near 50; moving between 40 and 50 since Tuesday midnight
  • Below EMA20, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (E-mini futures)
  • Trending down since 2:00 PM on October 12 in a down-sloping flag
    • RSI-21 moving above 40 since October 20 but mostly bounded above around 55
    • %K is crisscrossing %D higher
  • Above EMA20, at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) sloping up since 12:15 AM within a larger downtrend
  • The Bollinger Band is expanding slightly since 3:00 AM
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Down-Up

Previous Session

Major U.S. indices closed lower on Wednesday, October 21 in mostly lower volume. S&P 500 traded in higher volume. All but one – Consumer Staples – S&P sectors closed lower. The U.S. indices were up for most of the time but declined after 2:00 PM. Most mode small red body candle with upper shadow longer than the lower shadow.

From Briefing.com:

The S&P 500 decreased 0.2% on Wednesday in an indecisive session that was attributed to the uncertain outcome of stimulus talks. The Nasdaq Composite (-0.3%) and Dow Jones Industrial Average (-0.4%) posted comparable declines, while the Russell 2000 underperformed with a 0.9% decline.

[…]

In the Treasury market, the 10-yr yield increased for the fifth straight session, closing two basis point higher at 0.82% on growing expectations for inflation resulting from another stimulus package. The 2-yr yield was unchanged at 0.15%. The U.S. Dollar Index fell 0.5% to 92.64.

[…]
  • Nasdaq Composite +28.0% YTD
  • S&P 500 +6.3% YTD
  • Dow Jones Industrial Average -1.2% YTD
  • Russell 2000 -3.9% YTD
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