Morning Notes – Wednesday November 2, 2016

Directional Bias For The Day:

S&P 500 eMini Futures 02-Nov-16 8:45 AM

  • The futures are down but up from the low of 2094.50 at 11:00 PM on November 1
  • S&P 500 has been down for six consecutive day; during this period futures were down for five days
  • Odds are for a bounce
  • Prior to November 1, S&P 500 had six instances of six consecutive down days and two instances of seven consecutive down days, which means there is 67% chance of an up day

Markets Around The World

  • Markets in the East were down
  • European markets are down
  • Dollar index, USD/JPY are down; EUR/USD and GBP/USD are up
  • Commodities are mixed – Crude oil, NatGas and copper are down; gold and silver are up

Key Levels:

  • Critical support levels for S&P 500 are 2103.06, 2097.85, and 2080.07
  • Critical resistance levels for S&P 500 are 2114.74, 2129.50, and 2163.10
  • Key levels for eMini futures: break above 2108.50, the 4:00 PM high on November 1, for bulls and break below 2094.50, the low of 11:00 PM on November 1, for bears


  • Pre-NYSE session open, futures price action is to the down side; at 9:00 AM, S&P 500 futures were down by -2.00, Dow by -22.00 and NASDAQ by -4.25
  • On Tuesday, at 4:00 PM, S&P future (Dec contract) closed at 2105.25 and the index closed at 2111.72 – a spread of about 6.50 points; futures closed at 2103.75 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 2154.79 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
  • Broke below a small bearish ABCD pattern with a downside target near 2105.30 (100%, 2076.77 (138.2%), 2067.96 (150%), 2059.14 (161.8%)
  • Broken below 2015 high, which was acting as a resistance
  • Down trend – 1) broken below an uptrend line; 2) Lower high lower low; 3) turned back from the broken uptrend line on a bounce
  • Falling below the lower limit of a descending triangle
2-Hour (e-mini future)
  • 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)
  • Down trend since 5:00 AM October 25

Previous Session

S&P 500 01-Nov-16U.S. markets declined sharply on Tuesday and broke many support levels. After the gap-up open on October 24, S&P 500 has been in a down trend. On October 26 it opened with a gap-down but the attempt to fill it failed.

Other indices are faring similarly. S&P 500 is at the lower limit of a descending triangle with a close below it. Dow Jones Industrial Average is also at the lower end of a descending triangle though it did not close below it. NASDAQ Composite is at the lower end of a horizontal channel. Unlike S&P and Dow, it did not breach the September lows. Russell 2000 continues its down move following the break below of a horizontal channel on October 27.

Dow Transportation Average 1-Nov-16Dow Transportation Average is making different pattern and is showing more strength than other. It is rising toward a resistance level, the high of 2016, which is turning out to be the upper limit of an emerging ascending triangle. It has also advanced for 3 days out of past four days whereas S&P 500 and NASDAQ have declined for six consecutive days and Dow and Russell have declined for five out past six days.


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