Day Before GDP Report - Thursday 10-28

The bears looked like they were gaining the upper hand early yesterday; however, the bulls staged a late afternoon reversal and continued pushing overnight, such that the ES is testing critical resistance.  As key Institutional Level is just above at 1188.50, it would take a close above to target much higher. The potential for another leg up exists if this area is breached, so shorts need to defend it early.

 However, with the big US election next week and an FOMC meeting that will likely determine market action over the next six months, rumors are driving the markets and institutions are hedging.  Such an environment favors whipsaw and mean reversion rather than trend following. 

For what it’s worth, seasonality is still slightly bearish with Treasury supply today, but ends with the 7 Year auction at 1:00 pm.  The first month of November (Monday) has strongly bullish seasonality, as does the Tuesday close into Wednesday’s FOMC announcement at 2:15 pm.  Also keep in mind that preliminary GDP estimates (such as tomorrow’s at 8:30 am) are usually overly optimistic, being revised in subsequent months. 

Putting it all together, the shorts still have their window of opportunity to start a down leg, but a defense of 1188.50 and close below yesterday’s settlement of 1178.75 keeps them alive.There is a strong possibility that today's low will be tested during after close Globex Session.