S&P 500, Weekly
In my previous report from September 7th I took the view that ES (S&P 500 e-mini future) will not go below 1813 over the coming weeks. I also said that I’d be closing shorts and opening longs at around 1850 support while ES was trading at 1933 at the time. This worked out very well. Price retraced to 1860 where it pivoted and has been rallying since. I also predicted that this rally will take ES to 2046 resistance. We are at the time of writing 24 index points away from this prediction becoming fulfilled.
Market is getting overbought in terms of Stochastics Oscillator while it is getting close to the 2034 – 2046 resistance area. The 50 week SMA (currently at 2054) coincides roughly with this area. These technical factors together with other factors in the daily timeframe create a technical resistance that I expect will turn the price lower again. Support levels in the weekly chart are at 1813, 1861 and 1943.75 while resistance levels are at 2034.25, 2046 and 2104.70.
S&P 500, Daily
Since rallying strongly higher from 1860 support the upside momentum in ES has slowed down. The pivotal resistance area between 1982 and 2011.75 was a challenge to the bulls and price had to correct lower for a couple of days after hitting the 2011.75 resistance. This was highlighted by the Stochastics Oscillator. After price found support at 50 day SMA last week, we’ve seen another push higher but this has taken place with a lower volume. Price is now trading at the upper Bollinger Bands and near the resistance levels mentioned earlier. The 100 and 200 day SMAs coincide with the 2034 and 2046 resistance levels. As per usual these resistances are created by levels that used to support price. Stochastics and Money Flow are in the overbought zone wile RSI is indicating weakness by diverging from the price action (bearish divergence).
S&P 500, 240 min
The 4h chart reveals how there are no signs of market turning yet. Therefore another push higher should be in the cards. It also reveals the potential support levels that could cause the short sellers some challenges. The first one is at 2011.75, the pivotal high from September 17th while the 23.6% Fibonacci level almost coincides with the 1982.50 support. The importance Fibonacci support is at 1925 (61.8%).
Conclusion
Market is overbought and getting near important resistance levels. I expect that we will see a reaction lower from 2034 – 2046 range. I’m looking for price action confirmation for short trades inside this range with targets at 1982.50 (T1) and 1945 (T2). By taking partial profits at T1 the probabilities of my trade being successful are increased. I expect that the ES will create a higher low between 1943.75 and 1973 where the 100 week SMA currently is. The stock market is still in a topping formation that followed a 6 year bull market. A market top in my experience is not a good time for long term stock investments.
Janne Muta
Chief Market Analyst
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About Janne Muta, HotForex’s Chief Market Analyst
Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.
Traders and fund managers from around the world have benefited greatly from Janne’s technical analysis methods. The indicators and price action based trading models he has developed, have, after rigorous testing, proven to be invaluable in identifying high probability trades.
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