With concerns from North Korea subsiding and the passing of Hurricanes Harvey and Irma, risk concerns have faded, which appears to have led to new all-time highs in the S&P 500 futures market yesterday.
We believe it will be difficult for bulls to put together back to back noticeably higher days; but that doesn’t mean that today won’t go higher. We do expect bears to make a last ditch effort to defend the big round psychological 2500 area. This could create initial resistance, but will likely result in buy stops to be run above 2500 at some point.
With price now at the previously unknown territory of 2490.00, we will look at some upper levels based on the Fibonacci sequence, as well as price history for some lower levels.
On the hourly candlestick chart below, the blue lines indicate the Fibonacci extensions of last week’s range. The S&P 500 futures are currently testing the 78.6% extension, and the 100% extension comes in near 2495.25. It is very rare, especially early in the week, for this market to approach or exceed the 100% extension, especially given last week’s relatively wide range.
While we are not calling a market top but we do believe that the remaining four sessions this week will see resistance in the 2490 to 2500 area.
However, the easier trade is often to buy a pullback in this environment. The Fibonacci retracement levels from Friday’s close to this morning’s high are highlighted in red on the chart.
The first retracement is the 78.6% which comes in at 2484.00. This level coincides with yesterday afternoon’s low and is just below the overnight low from last night. We believe this could be a good area to buy a pullback today, especially if momentum is somewhat slow.
If the index develops a stronger downward momentum, traders may want to exercise patience and buy the 61.8% retracement at 2479.00. This level is just over 10 handles from this morning’s high. We frequently use the 10-handle rule in slower markets, and this area is just below the high from two weeks ago, giving it price history that increases its relevance as a target.
Other Fibonacci retracement levels on the chart can be useful for trading a pullback as well. Note that for us to keep our strong bullish bias, this market needs to stay above 2470.
Today’s calendar is light but does include Redbook at 8:55 a.m EST and JOLTS at 10 a.m. EST.