Physik

April 19 Market Update | Technical, Fundamental, News

CME_MINI:ES1!   S&P 500 E-mini Futures
Description:

An analysis for the week ahead.

Points of Interest:

61.8% Retracement (YTD VWAP Nearby); 127.20% (2900) And 161.80% (2920) Extensions; 2790 Gap Fill.

Technical:

Despite terrible news, the value of the current down-move (2/19-4/17) shifted higher, as evidenced by fixed-range POC at 50% retracement.

Other broad market indices, such as the $NDX, have shown extreme strength, trading above 61.8% retracement. Note, however, that we did put in a “hanging-man” candlestick on $NDX, which can point to a bearish reversal in coming sessions. Despite that, the overall picture is bullish until serious sellers step up.

On 4/9, the market breached the 50% retracement, leaving a poor high in early morning trading. The following session’s b-profile was indicative of long-inventory liquidation, helping remove sellers and strengthen the market.

On 4/14, market breaches 50% retracement, taking out the 4/9 poor high and closing at a key resistance, or low-volume area evidenced by the 2/19-4/17 fixed range profile. Low volume areas act as support/resistance, and so the initial move was a quick snap to the 50% retracement, leaving value behind, higher.

The rather mute 4/16 session was followed by a massive gap to the upside on some good COVID-19 coronavirus news. As soon as the overnight session opened, the market trended lower.

On 4/17, the morning intraday session failed to introduce any real selling or excess, suggesting downside would be limited. Intraday filled the 4/16-4/17 gap partially, and failed to bring value lower. The market later rallied, closing above the 50 simple moving average.

In case of higher prices, targets include the 127.20% (2900) and 161.80% (2920) extensions, as well as the 61.8% retracement (higher blue line). In case of lower prices, immediate targets include 50% retracement (~2790 gap fill), nearby VPOC, and 2730.

Scroll to bottom of document for non-profile charts.

Fundamental:

Key Events: Initial Claims, New & Existing Home Sales, Durable Good Orders, Earnings.

Social Distancing Impact: “A majority of people say they would resume at least some level of normal activities if the federal government announced a coronavirus reopening, but more than a third say they would remain in quarantine” (bit.ly/3akExtC).

Unemployment: Peak in Q2 (between 8-16%), due to scaling back of business in response to consumer demand drop (bit.ly/2VmDEgd). Likelihood of more layoffs/furloughs in the retail, transportation, construction, hospitality, and leisure sectors.

China Growth: GDP -6.8%, but the huge hit is history as provinces reopen earlier than expected and investors remain confident (bit.ly/2ymiCoX). Adding, “As counterparts in the West absorb the twin shocks from China and their own measures to combat the coronavirus, that will make life much harder for Asia’s largest economy. There are also, of course, risks of a second wave of infections from travelers returning to China.”

Second Quarter U.S. GDP Change Forecasts: -7% Congressional Budget Office, -9% Bloomberg, -25% Citi, -34% Goldman, -38% Morgan, -40% Capital Economics. Comparison: “Between Q3 2008 and Q2 2009, the economy contracted 4.3% on an annual basis.” Read More Here: bit.ly/2UJePuz.

Insurance Is Hot: Health insurers helped by “a perverse substitution effect” as COVID prompted fewer elective surgeries, less claims, and reduced doctors visits (bit.ly/2KspILr).

SME Funding: “The $349 billion cap for small business loans for the coronavirus stimulus was reached” (bit.ly/2KgY83G). Government aides are confident additional funding agreements will be made. Here is Moody’s take on what it will take for SMEs to get through 2020: bit.ly/2wUpxoY.

Boeing ($BA): Restarting production with 27,000 employees (bit.ly/2XKWO0I).

Bail-Outs: “The US banking sector is facing $100B (or more) in loan losses, the Fed will have no choice but to once again step in and bail-out the US financial sector” (bit.ly/2xHO4Od).

Debt: “Global debt to GDP was at a record 355% at the end of 2019 according to data from the IMF and BIS compiled by the Institute of International Finance” (bit.ly/34KAea9). “What seems like an enormous fiscal and monetary response worldwide to date to counter it is a mere drop in the bucket compared to the household wealth and economic growth that has already been lost.”

Car-Buying: "’If there’s a silver lining to this crisis, it is the rapid adoption of digital tools and processes’ to modernize the car-buying process” (bit.ly/2ypOOaZ).

Travel: People are booking trips and cruises for next year despite the virus (lat.ms/3cusueV).

Next Crisis: States and cities at stake amidst revenue drop, budget crunch (bit.ly/2wQaj4j).

Oil Target: Goldman Sachs said that output cuts were not enough prompting it to establish a $20 price target for WTI; the demand shock necessitates an additional 4 million bpd reduction (reut.rs/2wOJFIW). Still, over time, other nations may participate in further reductions up to 10 million bpd (reut.rs/2Vhv16w).

Oil Price Implications: “Almost 40% of oil and natural gas producers expect to go under this year if West Texas Intermediate crude stays around 30 per barrel this year” (bit.ly/2RNVB4R). Adding, "Net purchases of ICE Brent future and options were the largest in any week for seven months, since early September 2019, when expectations started mounting for a U.S.-China trade deal” (bit.ly/2VksOXU).

Mortgages: More than 2 million Americans have entered into mortgage forbearance agreements (bit.ly/3ez9Vbt). Important to know the growth rate of requests has declined.

Sentiment: Massive decline, but respondents confident about the future (bit.ly/3cyguJv).

‘Hold Tight’: Unwind of globalization due to tightening supply chains will push up manufacturing costs and prices (yhoo.it/3dDuNO4). Adding money into the system to aid spending will increase inflationary pressures, pushing yields lower. The expected sharp drop in earnings “coupled with increasing costs could trigger a wave of defaults.” Note that anti-inflationary weapons include rate hikes which could trigger defaults in the face of “a heavily indebted environment.”

‘V-Shaped Recovery’: "While real GDP could be hit through mid-year by cancelled flights and conferences and other business disruptions causing another round of inventory and capital spending cuts, the rubber band associated with a global rebound has been stretching for more than a year now” (bit.ly/3d1vpg2).

Sentiment: 34.9% Bullish, 22.4% Neutral, 42.7% Bearish as of 4/17/2020 (bit.ly/330VhEp).

Gamma Exposure: (Trending Lower) 1,907,158,484 as of 4/17/2020 (bit.ly/2UpgtRE).

Dark Pool Index: (Trending Higher) 46.4% as of 4/18/2020 (bit.ly/2UpgtRE).

Index Analysis:

$SPX: SPX
$NDX: NDQ
$RUT: RUT
$DJI: DJI
$NYA: NYA
$UKX: UKX
$NI225: NI225
$HSI: HSI

Futures Analysis:

/GC: GLD
/CL: USO
/NG: UNG
/ZB: TLT

Disclaimer:

This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve, especially me.

In no way should this post be construed as investment advice.

This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve (myself especially), so if you see something wrong, speak up.