Morning Notes – Tuesday May 12, 2020

/ May 12, 2020

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 11:30 PM
  • The odds are for an up day with elevated volatility – watch for break below 2909.00 for change of fortune
  • Key economic data due:
    • CPI ( -0.8% vs. -0.7% est.; prev. -0.4%) at 8:30 AM
    • Core CPI ( -0.4% vs. -0.2% est.; prev. -0.1%) at 8:30 AM

Directional Bias Before Open:

  • Weekly: In Correction
  • Daily: In Correction
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 6-Min: Up

Key Levels:

  • Critical support levels for S&P 500 are 2929.77, 2921.42 and 2903.44
  • Critical resistance levels for S&P 500 are 2944.25, 2954.86 and 2985.93
  • Key levels for E-mini futures: break above 2937.00, the high of 1:30 PM on Monday and break below 2896.75, the low of 2:00 AM

Pre-Open

  • On Monday at 4:00 PM, S&P futures (June 2020) closed at 2922.25 and the index closed at 2930.32 – a spread of about -8.00 points; futures closed at 2922.75 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are higher – at 9:00 AM, S&P 500 futures were up by +12.25; Dow by +133 and NASDAQ by +41.25

Markets Around The World

  • Markets in the East closed lower
  • European markets are mostly higher – France is down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • INR/USD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • NatGas
    • Copper
    • Coffee
    • Cocoa
  • Bond
    • 10-yrs yield is at 0.713%, down from May 11 close of 0.726%;
    • 30-years is at 1.412%, down from 1.445%
    • 2-years yield is at 0.189% up from 0.181%
    • The 10-Year-&-2-Year spread is at 0.524 down from 0.545
  • VIX
    • Is at 26.35; down -1.22 from May 11 close; below 5-day SMA;
    • Down from all time high of 85.47 on March 18; recent high 47.77 on April 21, recent low 30.54 on April 28
    • Sentiment: Risk-On

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

Monthly
  • Uptrend under pressure
  • April 2020 was a large green candle with small upper and lower shadows; index advanced +12.7% following a decline of 12.5% in March;
    • Stochastic %K is crossing above %D and near 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 lower band of the 120-month regression channel to middle of the band; only third break below since 2009 but first close below it
  • Sequence of higher highs and higher lows broken
Weekly:
  • The week ending on May 8 was a Bullish Engulfing candle with almost no upper shadow and small lower shadow;
    • Stochastic (9,1, 3): %K is above %D above 90
    • RSI (9) is turning up; above 50
  • The week was up +99.09 or +3.5%; the 5-week ATR is 180.60
  • The weekly week pivot point =2886.60, R1=2975.36, R2=3020.91; S1=2841.05, S2=2752.29; R1 pivot level was breached
  • An up week; third in last five weeks and fifth in last ten weeks
  • 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; below 39-week SMA, and 89-week SMA
  • In Correction
Daily
  • A small green candle that is quite like a Harmai as its real body was slightly outside previous day’s real body; small upper and lower shadows
    • %K is above %D;
    • RSI-9 above 60; moving between 50 and 65 since April 6; above 8-day RSI;
  • Above 20-day EMA; above 50-day EMA; below 100-day SMA and 200-day SMA;
  • In Correction; uptrend since March 23
2-Hour (E-mini futures)
  • Visually the price-action is almost the same as that on Monday; moving up since 8:00 PM on May 3; just below the high of April 30; sequence of higher highs and higher lows since May 3, the fourth such sequence since the uptrend started; broke below a shallower uptrend line from March 23 lows
    • RSI-21 rising since 10:00 PM from near 40 to above 60
    • %K is above %D; above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (E-mini futures)
  • An emerging W10 pattern of Arthur Merril’s M&W Wave patterns, which he says are slightly bearish in nature;
  • Rising since 2:00 AM from 2896.75 to near a resistance around 2937.00
    • RSI-21 rising since 11:00 PM from near 40 to near 60
    • %K is crisscrossing %D above 80
  • Above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving up since 2:00 AM
  • The Bollinger Band is expanding since 4:00 AM with price walking up the upper band
    • Stochastic (9, 1, 3): %K is crisscrossing %D lower from above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly lower on Monday, May 11 in mostly higher volume. S&P 500 and NASDAQ Composite closed higher. Dow Jones Transportation Average traded in lower volume. The day’s price range was relatively small. Most indices made Harami candlesticks.

From Briefing.com:

The S&P 500 finished flat on Monday in a resilient session that started with the benchmark index down 0.9%. The Nasdaq Composite, powered by its mega-cap components, rose 0.8% while the Dow Jones Industrial Average (-0.5%) and Russell 2000 (-0.6%) closed lower.

[…]

U.S. Treasuries started the day little changed but steadily declined during the rebound in stocks. The 2-yr yield increased four basis points to 0.18%, and the 10-yr yield increased four basis points to 0.72%. The U.S. Dollar Index advanced 0.5% to 100.19. WTI crude lost 1.1%, or $0.25, to $24.46/bbl despite news that Saudi Arabia is planning to cut June output by an additional 1 million barrels per day.

[…]
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