Stocks fluctuated and sold off strongly during the last hour of trading as home sales show gains raising 2.7%. Oil falls below $63; ES traders expect weaker demand.
ECONOMIC DATA
10:00 a.m. Consumer Confidence
YESTERDAY'S MARKETS
After trading sharply lower during the Globex session and making a nightly low at 825.00, the E-mini S&P 500 opened the session at 856.00 and rallied to 863.50, just below Friday's settlement. The S&P 500 pulled back to 853.50 where buyers came in and rallied all the way up to 881.75 where the rally lost its steam. The index sold off and tested 855.00 where another round of short covering resulted in a move back up to 881.00. unable to push higher after printing a double top on the intraday charts, the index pulled back once more to 865.00 where it found strong support. The E-mini S&P 500 rallied once more reaching 880.00, sat back to the 868.00 area and pushed up to new highs at 887.00 from where another pullback held at the 878.00 area resulting in another wave of buying that pushed the E-mini S&P 500 to new intraday highs at 894.00from where it sold off strongly reaching the 866.00-864.00 updated support areas. Unable to break lower and with the Russell holding above the critical 459.00 support level, the E-mini S&P 500 bounced back up to 877.00 and pulled back to test the previous lows. As the last hour of trading kicked off, the E-mini S&P 500 traded on a sideways pattern holding the 863.00 area on the downside and 877.00 higher trendline. Finally, the indexes broke lower and collapsed into the end of the session. For the day, the E-mini S&P 500 lost 31.25 points and settled at 834.75, the Nasdaq ended lower by 29.50 at 1162.00 and the Russell closed below the 459.00 key area at 440.10 with a loss of 21.20 points. The Dow lost 203 points finishing the session at 8175.00
MARKET COMMENTARY AND OUTLOOK
Yesterday I wrote: “Despite the fact that we were expecting last Thursday's rally to continue, we called to avoid the long side if the E-mini S&P 500 was trading below the 900.00 area and the intraday short-covering rally failed near there. On a day-trading basis, it is very difficult to call a market direction when the ranges continue to be so wide, but that 900.00 levels should be pivotal for position traders. I still think that we could see some rally before the elections, and that makes me think that the lows may be seen between Monday and Tuesday, so on a strong sell off, traders could position their selves for that rally with a limited risk position, like being long 900 November calls. I personally will like to see a test of the 800.00 where I will start to get long for the short term, if the E-mini S&P 500 trades lower and reaches the 780.00 area I will add a second position with tight stops, but once that index gets back above the 800.00 I will be a strong buyer. Friday's lows have a great chance to be tested once more, in particular, the low below the 8000 area that we saw on the Dow will scream for a second test, so I will be surprised if we simple rally from Friday's closing levels. Take into account that the indexes closed last Friday below fair value, so if the markets open lower then the 800.00 area on the E-mini S&P 500 may be tested during the next 48 hours. On the other side of the coin, a higher opening that holds a pullback to Friday's settlement could trigger my expected rally without testing Friday's lows. The Dow and E-mini S&P 500 are testing support at the lower boundary of a triangle formation which may be broken during the next couple of sessions, if the next move breaks lower, then the 7700-7500 areas on the Dow and 800.00 on the E-mini S&P 500 will be seen early this week, but if the next move is a bounce, then the 9000 level on the Dow and 918.00 on the E-mini S&P 500 will be seen early on the week.”
Yesterday's late sell off and the failure of the E-mini S&P 500 to trade above the 900.00 kept the strong downside momentum intact, and, have placed the index on its way for a test of the 800.00 level, or the 770.00-760.00 downside objective, 50% retracement of the all time highs. The nightly Globex lows at 825.00 and the early rally that started above the 840.50 last Friday's lows, which resulted in a short lived rebound, has given way for another leg down, that could drive prices well below the 800.00 area, if that happens and the E-mini S&P 500 rallies back but fail to break above the 866.00 area, much lower prices could be seen during the coming weeks, maybe levels near the 720.00. However another sell off that gets reversed in front of next Wednesday’s Federal Open Market Committee (FOMC) rates decision and the elections, could print a short term low on the daily charts and result in a 30 days rally, that have a projection to reach the 960.00 level, something near the 9800 on the Dow. There are still a lot of pending liquidations to be made by the funds and hedge funds, so the first rally, to 866.00, if the index trades well below the 800.00 area, or to 960.00 if we have a low during the next to sessions, will have to fail, obviously in the second scenario will drive prices to a test of this week lows or to new lows. Does this expected move to levels below the 800.00 will result in the last leg on this bear market? We certainly don't know, the only way to know it will be by the extension of the next rally.
For today's trading session, a pre FOMC rally, a short-covering rally, could result in a positive session, otherwise expect more downside follow through.
TODAY'S SESSION
There is initial resistance at 841.50-843.00 on the E-mini S&P 500, 1170.00-1172.00 on the Nasdaq and 443.50-445.20 on the Russell. If those are exceeded, the next hurdles will be at 849.75-852.00 on the E-mini S&P 500, 1179.50-1181.00 on the Nasdaq and 449.20-451.00 on the Russell. An early rally to those levels could offer a great shorting opportunity as trapped longs could start to sell there, however, if the indexes managed to trade higher, under the current volatility and wide range sessions, the inde3xes should be able to reach 864.00-866.00 on the E-mini S&P 500, 1188.50-1190.50 on the Nasdaq and 455.00-457.80 on the Russell. If those are exceeded, look for a huge short covering rally.
Initial support is at 828.50-826.00 on the E-mini S&P 500, 1154.00-1152.00 on the Nasdaq and 436.60-435.40 on the Russell. Those are yesterday's Globex lows, so if the market5s open above them and managed to post a double bottom at those levels, expect the indexes to rally, but if those do not hold, then look for additional support levels at 822.00-820.00 on the E-mini S&P 500, 1145.00-1143.00 on the Nasdaq and 431.00-430.20 on the Russell. Those will offer the last5 chance to the indexes to recover, if buyers do not jump in at those levels, look for the indexes to continue with this sell off and reach 812.00-810.00 on the E-mini S&P 500, 1136.00-1134.50 on the Nasdaq and 424.90-423.80 on the Russell. If the melt down do not end there, then trading below the 800.00 on the E-mini S&P 500 will be a real possibility.
TODAY'S SUPPORT, PIVOT AND RESISTANCE LEVELS
S&P
NASDAQ
RUSSELL
Resistance 4
877.50-878.75
1212.50-1214.50
462.00-464.20
Resistance 3
864.00-866.00
1188.00-1190.50
455.00-457.80
Resistance 2
849.75-852.00
1179.50-1181.00
449.20-451.00
Resistance 1
841.50-843.00
1170.00-1172.00
443.50-445.20
PIVOT
851.25
1175.75
451.30
Support 1
828.50-826.00
1154.00-1152.00
436.60-435.40
Support 2
822.00-820.00
1145.00-1143.00
431.00-430.20
Support 3
812.00-810.00
1136.00-1134.50
424.90-423.80
Support 4
799.00-798.00
1120.00-1118.00
420.90-419.20
DAILY PROJECTIONS
S&P
NASDAQ
RUSSELL
AS DAILY HIGH
864.25
1195.25
457.80
AS DAILY LOW
795.50
1103.50
420.90
Arturo Stern
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