Key Market Levels

The December contract in the S&P 500 (ESZ3) traded to a new contract high of 1774 in early morning trade after the ECB lowered interest rates from 0.50% to 0.25%. At the open of regular trading in the US the contract immediately sold off -1% and as of this writing sits at 1752. Is this the start of something bigger? Perhaps.

Please observe the chart below. Notice the price level of 1747 which is the low of the highlighted daily pink bar which was made last week on 11/1/13. This is level in my opinion is the most important number on the board. If prices trade below 1747, and especially close the week below 1747 it creates a weekly “outside” sell signal, i.e. the contract traded to a new high and will engulf the prior week’s candle.

If this confirms I am looking for prices to trade down to 1700 and near the 100-day moving average (green line). More confirmation would be given on a close below the 20-day moving average which is currently 1742. Expect bounces along the way (i.e. 1747 and 1742) but definitely something to keep a close eye on.