Trick or Treat We are in the middle of earnings season and more that half of the S&P 500 companies have reported and in general about half of those have been lower than what was expected but not many expected big upside surprises anyway. This week we will hear results from Chevron CVX and Pfizer PFE Visa V Ford Motor F and Starbucks SBUX. This past week we saw pretty good new home sales numbers and durable goods while unemployment claims were lower and the GDP was higher. We will start a new month on Thursday and on Friday will get the non farm payroll report.   Mike Burk tells us that since 1928 the SPX has been up 54% of the time in November with an average gain of 0.4%. During the 4th year of the Presidential Cycle the SPX has been up 50% of the time with an average gain of 0.3%. The best November ever for the SPX was 1928 (+10.4%), the worst 1948 (-11.7%).  Historically the last couple of day in October and first on November have been up days and we do have an oversold market at the moment. With elections next week some big traders may be waiting to get too long only do to the uncertainty the elections bring. After may be a good time for a rally regardless of the outcome.

If you trade with intrade you see the current prices on the presidential election.

Before we get to the charts - a video.

Thriller The zombies can dance!  This music video is from 1983. From Wikipedia - Voted as the most influential pop music video of all time, Thriller proved to have a profound effect on popular culture and was named "a watershed moment for the music industry" for its unprecedented merging of filmmaking and music. Guinness World Records listed it in 2006 as the "most successful music video", selling over 9 million units. In 2009, the video was inducted into the National Film Registry by the Library of Congress, the first music video to ever receive this honor, for being “culturally, historically or aesthetically” significant. It is also the most watched music video of all time, seen by more than 4 billion people all over the world.  Happy Halloween.

With consumer spending and government spending showing notable increases, the Commerce Department released a report morning showing a bigger than expected expansion by the U.S. economy in the third quarter of 2012. The report showed that U.S. gross domestic product rose by 2.0 percent in the third quarter following a 1.3 percent increase in the second quarter. Economists had been expecting third quarter GDP to increase by about 1.8 percent.

First-time claims for U.S. unemployment benefits fell by slightly more than expected in the week ended October 20th, according to a report released by the Labor Department. The report showed that initial jobless claims dropped to 369,000 from the previous week's revised figure of 392,000. Economists had been expecting jobless claims to fall to 372,000 from the 388,000 originally reported for the previous week.

Sales of new homes across the U.S. continued to gain steam as home builders and home buyers exude more confidence in the real estate market. New home sales were up 5.7 percent in one month, according to the latest September statistics. Even more strikingly, the total home sales in September were up 27.1 percent compared to September of 2011. The year-over-year gains show sizable increases in sales which are no doubt contributing to pricing stability and price gains in many markets across the country.

A pending home sales index maintained by the National Association of Realtors showed an annual gain in September for the 17th month in a row. NAR's latest Pending Home Sales Index showed the number of existing homes under contract in September up 0.3 percent from August and 14.5 percent from a year ago. The index, which represents contracts signed but not yet closed, has settled at 99.5 in September. An index score of 100 is equal to the average level of sales contract activity in 2001, a year in which sales were in line with historical norms. Signed contracts typically close one or two months after the sign date.

After reporting a sharp drop in new orders for U.S. manufactured durable goods in the month of August, the Commerce Department released a report showing that durable goods orders rebounded by more than expected in September. The report showed that durable goods orders jumped by 9.9 percent in September after tumbling by 13.1 percent in August. Economists had been expecting durable goods orders to increase by about 7 percent. Excluding a substantial rebound in orders for transportation equipment, durable goods orders rose by 2.0 percent in September following a 2.1 percent drop in the previous month.

Today's chart illustrates the price to earnings ratio (PE ratio) from 1900 to present. Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1900 into the mid-1990s, the PE ratio tended to peak in the low to mid-20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to extraordinary levels during the financial crisis (late 2000s). Since the early 2000s, the PE ratio has been trending lower with the very significant but relatively brief exception that was the financial crisis. More recently, the PE ratio has moved slightly higher. It is worth noting, however, that even with this recent uptick, the PE ratio still remains at a level not often seen since 1990.

This past week's   sectors.

This past week's indices  -   

There are just three more days of trading for the month and the Dow and Russell 2000 are now back to the price range of the start of September, while the S&P 500 and gold are a bit above and oil is in its second month of decline, only eight points above its lower Bollinger band. There is a possible end of month window-dressing coming or cash flows in the first two days of November but larger players may be waiting until after the election.

On the 60 min. chart we see an attempt of a bounce on the 23rd but really only sideways to slightly down for the rest of the week with a small rally on Friday. The RSI for the Dow crossed back over 30 at that low and is now back up to 44. 

With presidential elections coming soon this Dow chart shows how it has done under the last four presidents. Since Pres. Obama took office the Dow has doubled in price. 

This week the dog Dow gave up 1.7% and closed a bit under the 20 week moving average. The volume this week was lower though than the previous week. If it does go lower watch the 50 week EMA for support, though we are entering a favorable time for the market and we may see a bounce this week. 

In this daily view showing the low in June from the high last month we have now retraced 38.2%, which is at a support area and though it would be nice to see RSI again go under 30, we may just start an upward movement from here.

Here is basically the same chart, but showing the Dow futures for December. 

This Dow futures chart we showed originally  last Monday before this extended downward move. It shows the two blue lines being equal length in what might have been a measured move. It did indeed make this move and actually dropped a bit lower as well. That move coincided with the 61.8% retrace of the shorter timeframe of this chart. At the most recent low there was positive divergence on the RSI as it hit the green arrow for the second chance of buying. 

The Dow Jones utility average held this green line support this week and does have trendline support a bit lower at the blue line if the horizontal should fail. 

With the NASDAQ losing ground the summation index remains on a sell. 

The NASDAQ highs minus lows index declined under the green trendline, though the index itself remains sitting on the upper line shown. 

The moving average of the number of new highs continued its decline though so far is still holding above the August lows. 

The NASDAQ lost 0.59% this week and closed at the trendline in blue. After three straight weeks of decline a bounce would be quite typical. Further below you see horizontal support at the green line. 

On this 60 min. NASDAQ chart you see how the previous resistance became support, which is also the 61.8% Fibonacci retracement level. By Friday the RS I was exhibiting positive divergence as it had gone under 30 and moved over 30 while the price stayed about the same. We also have positive divergence showing on the MACD and the histogram is positive. 

The NASDAQ 100 ETF mechanical went short above 68 and remains so this week with a close at 65.35. This chart is one of many on our stockcharts public page. 

The NASDAQ 100 from the June low had retraced down to the 50% level and closed up back over the 38.2% line. 

The semiconductor index actually ended up 0.65% for the week and does have a possible reversal candle. There will be resistance if it ascends, at the 200 week EMA at 381. 

The unsettled market increased the volatility with the VIX closing up at 17.81. 

The moving average of the number of new highs minus new lows on the NYSE declined but not dramatically as the index itself closed only a small amount under support. 

Another view of new highs minus new lows of the NYSE with the S&P 500 just below. 

At the close on Friday 44% of all stocks on the NYSE are now trading over their 50 day moving averages. This chart goes back to early in 2010 and the current level is not a typical point from which the market rallies. 

The S&P 500 bullish percent has been short since the break under the 20 day EMA and the indicator crossing over negatively and actually this current consolidation could break either way. 

The S&P 500 dropped under support and put in a low and a test of the 20 week moving average closing above it for the week. 

We showed last week how the prior rally had gone back up to test the previously broken wedge trendline for a typical short. The MACD is still pointing lower and if this does break lower look to 1400 and and then the 1390 as support areas. 

In this view of the S&P 500 with a Fibonacci retracement off the June lows. We see it has now almost retraced to the 38.2% level which is at 1396. 

That level is also seen in this 60 min. chart at the lower purple dotted horizontal line. Note that RSI had gone under 30 and is now up to 45 which does make it a little bit bullish. 

Here is a 15 min. chart with three parallel channels and now a parallel  rectangle to make for pretty basic trading short term using those lines as a guide. 

The S&P 15 min. mechanical chart had some whipsaws later in the week after a decent gain on the short side. It actually ended the week going long late on Friday. 

The ultra short for the S&P 500 had a crossover buy at about $53.50 and is up about three dollars from there. The greater volume has been on the buy side but it needs to hold 56 for support. 

Showing the June low retracement levels from the recent high we have the S&P 500 futures having broken a short-term trendline and is now close to the 38.2% retracement level. 

This is a shorter-term chart with a different set of Fibonacci levels and a measured move projection which took it down to 1405, which is also the 50% retracement level. It exceeded those levels but had positive RSI divergence at the time and rallied a bit from those lows. 

The Russell 2000 also shows no positive divergence of the MACD so far and its 200 day EMA sits basically at the 50% retracement level. 

Here is a different view but the same levels and we see the close was just above the 38.2% retracement. 

You see the 60 min. Russell 2000 is  within this parallel channel with resistance overhead and support below. In this timeframe there is positive divergence from the MACD and RSI. 

The 3-X ETF for the Russell 2000 touched the 50% retracement level and bounced only slightly from there. Note that when the high which was over 68 was reached, the RSI was up over 70 and then went under 70 for the sell. The previous time it had gone over 30 was prior to the lows that were near 42. 

The banking sector continued lower this week, but so far has held the support at $49. There could be some minor additional support just below that at the second green line shown. 

Here is a longer-term chart showing the importance of the $49 level. A major break here, which is actually suggested by the higher volume could drop it quite a ways to support levels between 46 and 47. 

The retail sector ETF closed below its 50 day EMA and the up trend line started last May. This then is an important level. 

On the weekly chart we see the retail sector having lost 1% this week  and has a possibility to drop back towards the $42 support. 

The Dow Jones world market lost 1.6% this week and it shows support below at the purple trendline. 

The FTSE was down 1.5% in this multi-week trading range. 

The Shanghai exchange had kind of surprised with the three-week upward movement but gave back almost 3% this week. 

The commodity ETF which had dropped significantly but had held support over the 50 week EMA,  dropped right to it this week losing 2.7%. 

Oil was down 4.8% this week and closed under the 200 week EMA this makes it rather challenging for the Dow as Chevron CVX and ExxonMobil  XOM are components. 

The oil futures chart shows the drop was to under the 61.8% retracement though it did hold the support that was found in early July. A drop below that could  take it to the $82 area by the 78.6% retracement level. On the bullish side RSI had gone lower and has a small bounce from late in the week. 

Natural gas gained 4% for the week as RSI is now just over 70. 

On this shorter time frame chart we see a little double top was made in natural gas futures and as it was not successful to break out it broke down retracing 38.2% from the September 20 low 

This natural gas ETF chart was a very short term one for the week showing that the move under the 3.42 could take it to one of the Fibonacci projection levels shown and it ended the week just at the 127.2% line. 

UGAZ   3-X ETF for Nat Gas so it's moves are more exaggerated and though down 4% on Friday, it did close over the 60 period EMA on this 60 min. chart.

This daily chart with retracement levels starting the from the low in April where we first suggested the buy of Nat Gas. 

Gold closed down 0.59% for the week with its three-week decline now getting closer to the 20 week moving average at 1670. 

Here is a daily view as it is held over the 38.2% retracement level. 

And here an additional view with clearer retracement levels from the low at the end of 2011. 

The gold miners ETF lost about 1% this week but it did successfully test the 50 week EMA so far. 

Here is a 60 min. view of GDX and if this resolves  itself with an upside break it would have additional resistance at the second trendline in green above. 

And the mechanical of the gold miners ETF is still on a short as it closed down $0.35 on Friday. 

Silver was flat for the week and it tested its 50 week EMA successfully so far. 

The mechanical for SLV remains on a short. 

Copper lost 2.3% this week and it has closed over the 20 week moving average but may still need to test the trendline just below. 

The euro was down some this week but still holding within its six week range. 

The euro futures still inside a consolidation pattern. 

The US dollar weekly chart shows some caution as this pattern could be a bear flag unless it successfully closes back over that 50 week EMA. 

The US dollar futures shows this horizontal support just overhead. 

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Check the updated Earnings Calendar on all overnight holds.

This week's economic calendar for the USA.