Morning Notes – Tuesday September 27, 2016

Directional Bias For The Day:

S&P 500 eMini Futures 27-Sep-16 8:30 AM

  • The futures are sharply down from European session high of 2154.00
  • Odds are high for a down day
  • S&P 500 has been down 7 out of last 8 years during the final five days of Q3
  • Key levels for eMini futures: break above 2147 for bulls and break below 2133 for bears
  • Markets in the East were mixed – Sydney and Mumbai were down but Shanghai, Tokyo, Hong Kong and Seoul were up
  • European markets are sharply down after giving up the higher open
  • On Monday, at 4:00 PM, S&P future (Dec contract) closed at 2139.00 and the index closed at 2146.10 – a spread of about 7.25 points

Key Levels:

  • Critical support levels for S&P 500 are 2139.57, 2131.20 and 2119.92
  • Critical resistance levels for S&P 500 are 2152.63, 2158.54 and 2164.30
  • Pre-NYSE session open, futures price action is to the down side; at 9:15 AM, S&P 500 futures were down by -3.50, Dow by -28.00 and NASDAQ by -3.25

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

  • Up trend since Feb 08, 2016
  • Current uptrend under pressure
  • Fallen below an up-trending 10-week SMA
  • Up trend since Feb 08, 2016 with one pullback; broke out of a 2-year trading range in July, 2016
  • Last swing low, 1991.68, was reached on June 27, 2016
  • Uptrend remains under pressure
  • Price crossed below 10-day EMA
  • Monday opened with gap-down whereas Thursday opened with gap-up forming an uneven island pattern
  • Price fell below the lower bound of the rectangle trading range that was once broken on September 9
2-Hour (e-mini future)
  • On September 22, turned back at the upper limit of the gap-down following September 8 close at 6:00 PM
  • Sequence of Higher high and higher lows since 10:00 PM on September 22 remains in danger of breaking; critical level 2131.50
30-Minute (e-mini future)
  • At the mid-day September 21 low
  • Low reached in early Asian session was 2133.25
  • The 61.8% Fibonacci retracement of the move from the low of 2107.75 on September 14 to high of 2172.75 on September 22 is 2132.58
  • The 76.8% retracement of the rally from September 21 low of 2126.25 to September 22 high is 2133.64
  • The 61.8% retracement from 2100.25, the low on September 12 is 2127.94

Before NYSE Session Open

S&P 500 - 26-Sep-16Monday was down following a down Friday. According to Stock Trader’s Almanac, it has happened 8th time in 2016 and usually carries an ominous sign.

Since January 1, 2000 through todays close there have 179 DJIA Down Friday/Down Mondays (DF/DM) including todays. From DJIA’s closing high within the next 7 calendar days to its closing low in the following 90 calendar days, DJIA has declined 173 times with an average loss of 7.3%. Declines following the DF/DM were greater in bear market years and milder in bull market years (see page 80 of Stock Trader’s Almanac 2016). The five times when DJIA did not decline within 90 calendar days after were October 16, 2002; May 29, 2003; February 12, 2014 and October 22, 2014.


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