Last Friday the U.S. equity index futures took a wide swing from new all time highs at 2443.50 to a low of the week at 2412.50 in what would amount to a 31 point range in the S&P 500 futures. There seems to be some uptick in volatility as today begins the two day FOMC meeting that will conclude tomorrow with what the financial markets perceive to be a 95% likelihood that interest rates will once again be raised.
On the left side of the chart below (click on chart for larger view) shows the larger picture of the S&P 500 futures on four hour candlesticks with a trend line from the May low to last Friday’s low, where Monday’s low also held. The upper trend line is from the high on June 2nd to the high on June 9th.
Overall the S&P 500 futures have been trading within a range, and trend lines have been an excellent tool for these markets. The price marker across the chart in yellow shows the 2428.00 level which is the halfway point of Friday’s/last week’s range. We are using this halfway mark as a pivot for this week’s trade.
Above 2428.00, we expect this market to target a new all time high up to the 2445.00 area of the upper trend line and once it reaches that level we will look for resistance. While this market is below the 2428.00 pivot, we expect for sellers to push this market to the lower trend line at the 2419.00 area and there we will look for potential support.
These levels however will be less reliable if the market is making a very volatile response to the FOMC tomorrow. However, we do not expect any unusual market action but rather an orderly trade following tomorrow’s FOMC announcement. If these trend lines are violated then we look for the lower line to turn to resistance or the upper line to turn to support to confirm the trend. We believe that this technical setup could be valid for the rest of the week.
Note: Exchange fees not included in calculations.