Morning Notes – Friday October 28, 2016

Directional Bias For The Day:

S&P 500 eMini Futures 28-Oct-16 6:45 AM

  • The futures are moving up after deep losses
  • Up more than 12 points from 4:30 AM low of 2116.00
  • Odds are for a bounce which may not last for long – watch for break of critical levels for direction

Markets Around The World

  • Markets in the East were mixed – Shanghai, Hong Kong, Seoul and Sydney were down; Mumbai and Tokyo were up
  • European markets are mostly down – France is the sole exception
  • European markets are sharply up from the session open lows
  • Dollar index, GBP/USD are down; EUR/USD and USD/JPY are up
  • Commodities are mixed – Crude oil, gold and silver are down; NatGas and copper are up

Key Levels:

  • Critical support levels for S&P 500 are 2130.09, 2124.57, and 2114.74
  • Critical resistance levels for S&P 500 are 2140.53, 2147.13, and 2154.79
  • Key levels for eMini futures: break above 2129.50, the 8:00 PM high on October 27, for bulls and break below 2116.25, the low of 4:30 AM, for bears


  • Pre-NYSE session open, futures price action is to the upside; at 7:00 AM, S&P 500 futures were up[ by +4.50, Dow by +33.00 and NASDAQ by +9.00
  • On Thursday, at 4:00 PM, S&P future (Dec contract) closed at 2127.75 and the index closed at 2133.04 – a spread of about 5.25 points; futures closed at 2123.50 for the day

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

  • Up trend since Feb 08, 2016
  • Current uptrend under pressure; need to rise above 2187.87 to relieve the pressure
  • 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
  • In danger of making a small bearish ABCD pattern; a break below 2119.12 will complete it with a target near 2104 level
  • At the broken resistance or 2015 high; made a green harami within a large red candle of the week of October 10
  • Uptrend remains under pressure; need to rise above 2179.99 to relive the pressure
  • Bearish engulfing candlestick pattern
  • Below the previously broken down trend line
  • The 14-day RSI has fallen below the downtrend line that it broke to the upside on October 14
  • A break below 2114.74 will change the daily trend
2-Hour (e-mini future)
  • Turned down from 20-bar and 50bar EMA on Thursday after staying above them for couple of bars
  • Fell below the uptrend line, which started on 10:00 AM October 13, after hugging it for few bars
  • Formed an ABCD pattern – H1=2149.75; L1=2124.75; H2=2143.75; L22116.00
  • Bouncing off the low, 2116.75, of 8:00 PM October 16
  • Downtrend since 10:00 AM on September 22 – mostly lower lows and lower highs; need to break above 2156.50 to break this downtrend line
30-Minute (e-mini future)
  • Made a double bottom of 2116.00 at 3:00 AM and 4:30 AM
  • Risen above previous support of 2123.25, the low at 9:30 AM on October 21
  • At 5–bar EMA, above 20-bar EMA
  • Down trend since 5:00 AM October 25

Previous Session

Russell 2000 27-Oct-16Thursday started with U.S futures rising but the mood of the market changed at 9:00 AM when S&P 500 futures were at 2143.75. After that it was mostly downhill. A brief rally at 10:00 AM fizzled at the 20-bar EMA on 30-minute chart.

For the day, S&P 500 and NASDAQ Composite made a bearish engulfing candlestick pattern. S&P 500 did not breach previous day’s low but NASDAQ did. Dow Jones Industrial Average turned down from 50-day EMA.

IWM, Russell 2000 ETF, 27-Oct-16Russell 2000 followed through on its break of an uptrend line on Wednesday. In the process, it also broke below a support level, the low that it reached on September 13 and October 13. Along with the high reached on September 7 and September 22, this forms a break of a horizontal channel – high of 1263.43 and low of 1206.07. The downside target is near 1148 level. The corresponding target for IWM, iShares Russell 2000 ETF, is 114.35, which is 3.4% below current level of 118.36.

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