Morning Notes – Friday July 17, 2020

Directional Bias For The Day:

  • S&P Futures are higher;
  • The odds are for a sideways to an up day; elevated volatility – watch for a break below 3195.25 for change of sentiments
  • Key economic data due:
    • Building Permits (1.24M vs. 1.30M est.; prev. 1.22M) at 8:30 AM
    • Housing Starts (1.19M vs. 1.17M est.; prev. 0.97M) at 8:30 AM
    • Prelim UoM Consumer Sentiment ( 79.0 est.; prev. 78.1) at 10:00 AM
    • Prelim UoM Inflation Expectations ( prev. 3.0%) at 10:00 AM

Directional Bias Before Open:

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

Key Levels:

  • Critical support levels for S&P 500 are 3000.64, 3180.08 and 3166.37
  • Critical resistance levels for S&P 500 are 3233.69, 3238.28 and 3253.58
  • Key levels for E-mini futures: break above 3218.25, the high of 10:00 PM on July 15 and break below 3195.00, the low of 4:00 AM

Pre-Open

  • On Thursday at 4:00 PM, S&P futures (September 2020) closed at 3207.25 and the index closed at 3215.57 – a spread of about -8.25 points; futures closed at 3194.50 for the day; the fair value is +13.25
  • Pre-NYSE session open, futures are higher – at 8:15 AM, S&P 500 futures were up by +18.25; Dow by +136 and NASDAQ by +101.75

Markets Around The World

  • Markets in East closed mostly higher – Tokyo and Singapore were down
  • European markets are mixed – Germany, U.K., Italy, and STOXX 600 are up; France, Spain, and Switzerland are down
  • Currencies:
    Up Down
    • EUR/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • INR/USD
  • Commodities:
    Up Down
    • Gold
    • Copper
    • Palladium
    • Coffee
    • Cocoa
    • Crude Oil
    • NatGas
    • Silver
    • Platinum
    • Sugar
    • Cotton
  • Bond
    • 10-yrs yield closed at 0.612%, down from July 15 close of 0.630%;
    • 30-years is at 1.301% down from 1.331%
    • 2-years yield is at 0.145% down from 0.165%
    • The 10-Year-&-2-Year spread is at 0.467 up from 0.465
  • VIX
    • Is at 27.05; down -0.95 from July 16 close; below 5-day SMA;
    • Recent high 44.44 on June 15; low 23.54 on June 5
    • Sentiment: Risk-Off to 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 10 was a small green candle with large lower shadow and almost no upper shadow
    • Stochastic (9,1, 3): %K is above %D;
    • RSI (9) is above 60
  • The week was up +55.03 or +1.8%; the 5-week ATR is 165.20
  • The weekly week pivot point =3162.52, R1=3209.34, R2=3233.64; S1=3138.22, S2=3091.40; No pivot levels were breached
  • An up week; third 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 is under pressure
Daily
  • A small real body with small lower and upper shadows resembling a Doji; in a congestion area since July 6;
    • %K back to %D from above; potential Bearish Divergence
    • RSI-9 is above 60; above 8-day RSI;
  • Above 20-day EMA; above 200-day SMA, above 50-day EMA; above 100-day
  • Uptrend since March 23 is under pressure
2-Hour (E-mini futures)
  • Moving sideways since 6:00 PM on July 14; moving up since 6:00 PM on June 28 from 3004.75
    • RSI-21 rising since 2:00 AM from near 40 to near 60
    • %K is above %D above 75
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (E-mini futures)
  • Moving sideways since 6:00 PM on July 14 within 3192.00 and 3233.00;
    • RSI-21 moving along 40 and above
    • %K is crisscrossing %D above 80;
  • At/above EMA20, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (E-mini futures)
  • Bollinger Band (20, 2.0) moving sideways since 3:15 AM on July 16
  • The Bollinger Band was narrow from 11:15 PM to 3:30 AM; expanding since with price walking up the upper band
    • Stochastic (9, 1, 3): %K is above %D
  • Bias: Up-Side

Previous Session

Major U.S. indices closed mostly lower on Thursday, July 16 in lower volume. Dow Jones Transportation Average closed higher. Most indices made small real body candles.

From Briefing.com:

The S&P 500 declined 0.3% on Thursday amid relative weakness in the technology sector, but the market did close near its best levels of the session. The Dow Jones Industrial Average declined 0.5%, the Nasdaq Composite declined 0.7%, and the Russell 2000 declined 0.7%.

[…]

The top-weighted S&P 500 information technology sector, however, struggled all session with a 1.2% decline amid a lack of leadership from Apple (AAPL 386.09, -4.81, -1.2%) and Microsoft (MSFT 203.92, -4.12, -2.0%). The utilities (+1.3%), materials (+0.4%), communication services (+0.3%), and consumer staples (+0.2%) sectors closed higher.

[…]

U.S. Treasuries finished the session mostly higher but closed near their flat lines. The 2-yr yield increased one basis point to 0.15%, while the 10-yr yield declined two basis points to 0.61%. The U.S. Dollar Index increased 0.3% to 96.33. WTI crude futures fell 0.9%, or $0.37, to $40.76/bbl.

[…]
  • Initial jobless claims for the week ending July 11 decreased by 10,000 to 1,300,000 (Briefing.com consensus 1.260 million).¬†Continuing claims for the week ending July 4 decreased by 422,000 to 17,338,000.
    • The key takeaway from the report is that initial jobless claims continue to run at extremely high levels relative to where they were before the COVID shutdown period began in March, which is a reminder that the labor market recovery still has a long, long way to go.
  • Retail sales increased 7.5% m/m in June (Briefing.com consensus 5.2%) following an upwardly revised 18.2% increase (from 17.7%) in May.¬†Excluding autos, retail sales rose 7.3% (Briefing.com consensus 5.0%) on the heels of a downwardly revised 12.1% increase (from 12.4%) in May.
    • The key takeaway from the report is that the pace of growth slowed in June, which is important knowing that retail sales activity in July will be crimped by efforts to pause or roll back reopening activity in response to a surge in coronavirus case counts. In other words, the good news for June will be offset by an expectation for less good — or even bad — retail sales for July.
  • The NAHB Housing Market Index for July increased to 72 (Briefing.com consensus 58) from 58 in June.
  • The Philadelphia Fed Index for July decreased to 24.1 (Briefing.com consensus 22.5) from the 27.5 reading in June.
  • Business inventories declined 2.3% in May, as expected, following a revised 1.4% decline in April (from -1.3%).
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