It has been a rather exciting few days in the U.S. equity markets. Until recently, they had been generally quiet, moving in small ranges and primarily in one direction. However, these markets are now seeing some volatility, giving them a two-sided price action that leads to a constant change in the charts.
These moving markets have inspired us to revisit our technical view of the S&P 500, adjusting our targets based on current price action. We will continue to use the thirty-minute candlestick chart that extends back to last week’s open in order to provide a view that is relevant for today's trade.
Currently, the ESH18 is trading at the 2828 area; and since today is the first of the month, money may be coming back in to buy. Yesterday was FOMC day, and tomorrow the monthly non-farm payrolls release is scheduled, so this market should continue to see some action.
We will take a look first at upside potential targets. Price is hovering just below the upper green trend line, which connects the all-time high earlier in the week to a series of lower highs. This trend line is currently serving as resistance around the 2830 area.
We have identified three possible upside levels to watch if buyers break above the green trend line. The first level would be the grey shaded zone. This highlights the range from yesterday’s regular session high of 2839.75 to today’s overnight high of 2836.75. Just above grey zone in red is the 50% retracement of last week’s range at 2841.25, which would be the next target.
We anticipate these levels serving as resistance on the first touch. However, if bulls manage to push higher, the next target would be Monday’s close of 2853.25 marked in yellow.
Next, we will look at the downside As long as this market maintains resistance at the trend line, we would look first for a trade down to yesterday’s 2813 low, marked in orange, and then down to last week’s regular session low of 2809.50, marked in green.
We had looked at 2809.50 as support early in the week. However, given how close price traded to that level yesterday, we are less confident in support there if that price is tested today. Because of this, we are adding an additional downside target at 2800, marked in blue. This big round level would be an additional target for bears as well as support for bulls.
As we have said for much of this week, this market is showing itself to be two-sided. Therefore, we are looking at both bullish and bearish trades based on this chart; and while we still want to buy dips, we are doing so with smaller size.
Today’s economic calendar has several reports. Following are the most relevant items on the schedule:
Jobless Claims 8:30 AM ET
Productivity and Costs 8:30 AM ET
PMI Manufacturing Index 9:45 AM ET
ISM Mfg Index 10:00 AM ET
Construction Spending 10:00 AM ET