Last week I wrote, “with a high failure firmly in place, look for the ESZ20 50-day moving average to be pierced and the 3330-3332s support to be tested.” Well, half the expectation came to fruition, the 50-day moving average was pierced on Monday, but the large single-day selloff did not reach the 3330-332s support which would have been a 100+ point move. The ESZ20 spent last week consolidating inside Monday’s daily range, never moving above last week’s 3470s support turned resistance area and the 3405/10s key support area. Monday’s selloff was the first move out of the consolidation area and the day’s low was a bounce off a high-volume node of a multi-month (Aug, Sep, and Oct) volume profile. The move down might not be over and the 3330-3332s support could be tested this week.
Since the ESZ20 spent the week in a consolidation, all last week’s structural resistance and support remain the same:
Resistance Areas (above):
3576.50 – back-adjusted all-time high 3535-3541s 3523-3524s 3496-3508s 3462-3470s
Support Areas (below):
3360s area 3330-3332s 3290-3300s 3200s area
With US elections looming in one week which looks like it will have the largest turnout in US history, there is uncertainty in the air. Both political parties think they are winning and Trump at a rally on Saturday once again said he would not commit to a peaceful transition if he loses the election. Coronavirus cases continue to soar in the US and globally, corporate earnings are wavering, and corporate guidance is lacking over future economic uncertainty. Buoying US stocks is the promise of a fifth US coronavirus relief package which has become hindered by partisan politics. A relief package should give US stocks a bullish boost.
Volatility remains steady and elevated. The long and intermediate term trends remain firmly in place until the 3200s are reached and cleared.
If the 3330-3332s are reached this week, it is likely the area will be breached and the 3290-3300s will be tested. For the bulls, retesting the 3462-3470s area is likely but it will be a tough climb to reach the 3496-3508s without the short-term hope of a relief package getting through the Senate.
Below is a snap of the ESZ20 daily chart with the above support and resistance numbers marked for reference. Thanks again for reading. For more information on how DTG can help your trading, visit us at DiscoveryTradingGroup.com
In the Tradechat Room
Our MIM broke yesterday at the 15:50 reveal but it was a fairly neutral number. All the action was from a 13:30 bounce that extended into the close with a sideways period between 14:20 and 15:50. The action was too risky to take a long when we were trading a 9:1 down day which has a high probability of closing on the lows.
It’s Tuesday so we look at the election in light of COVID. One week to go and we are pushing to new highs in daily cases on our third wave up. Daily deaths are also showing a push higher and I would expect them to be between 950 and 1000 this time next week and show a real move higher. A week after that if we don’t turn this wave back down we will be pushing beyond the August highs and marching toward the April high.
To use our table, go to https://t2r4.com/cv19/views. Each column is sortable and if you click on a cell you will get a time-based chart of the state.
Wear your masks! Stay home! Take your Vitamin D!
Chart of the Day
Forecasts all lean in one direction and more solidly than 2016 so either the pollsters are way off on their models, which is very possible in an election that hasn’t been done in the middle using early/mail in voting. That modeling error works both ways and Biden might win even bigger than predicted. One week to go. Thank goodness.
(ESH20:CME) GLOBEX Session
(ESH20:CME) Day Session
Opening Print: 3421.75
Total Volume 1.9M
S&P 500 RECAP – Trade Date 10/26/ 2020
#ES Money Maker Chart
S&P 500 Futures: Second Highest Volume of October
After a 34.25 overnight range leaning lower, the S&P 500 Futures opened Monday’s regular session at 3421.75, down 26.50 handles, rallied to 3430 just after 9:00 CT for what would amount to the daily high, before rolling over and selling hard through the morning and into the noon hour. The low of the day of 3356.00 came in just after 12:30, down 76.00 handles from the morning high before afternoon buyers came in, pushing the S&Ps up to 3386.50 at 1:45. Then after pulling back to 3373.00 in the final hour, the futures rallied late in the session to settle at 3395.50, down 52.75 handles on the day.
In terms of the overall price action, it was all about selling the rally at 9:00 and then buying the 12:30 low. The late-day rally pushed the ES up 39.50 handles off the low. In terms of the overall trade, volume was on the high end with 1.9 million mini’s traded.
Record COVID Cases And Dimming Hopes Of A Stimulus Deal
The record jump in COVID19 cases and dimming hopes of a stimulus deal weighed on the S&P 500 with all 11 sectors closing lower. The Dow had its worst one-day % drop since September 6th with 29 of 30 stocks falling on the day. You could tell after the early uptick and reversal and the ES breaking the 3400 level that it was going to be a long day. According to David Stubbs, head of investment strategy at J.P. Morgan Private Bank, “The surge in covid19 cases is a worrying picture for sure, but we always knew this recovery would be stop-start. We won’t be truly moving into the main part of a new cycle until the health-care issue itself is dealt with.”
Let’s face it, the stock market has gone a long way and the uncertainty between the election, record covid cases and the lack of a stimulus deal there is a lot more risk-off than on. Was I surprised by the drop? No, not at all. I was more surprised by the late rally but when you look at Thursday’s earnings calendar there could be some tech stock bottom picking going on. Both Amazon and Apple close high and Apple was the only stock in the Dow that gained.
Our view, this is a hit and run market right now and I think it will remain that way for the next two weeks. That said after all the votes are tallied and a winner of the election is chosen I think the ES will stage a big year-end rally. As for today, our lean is to sell the early rallies and buy the pullbacks. I know I have been talking about the average 5 days ES trading ranges but I think yesterday was an exception to the averages. According to Dow Jones Market Data, historically, the week before a presidential election is good for stocks. Since 1928, the market has usually risen in the last full week before the contest. The S&P 500 has been up in 70% of those weeks and the gains are even more frequent if measured from the Tuesday before the election to Election Day. The index has risen in 91% of those instances.
Market Vitals Technical Analysis
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