The S&P 500 (ESM18) futures, along with the other U.S. equity index futures, have been rallying this week with the ESM18 trading at its highest levels since mid-March of this year. However, as we have reiterated since the sell-off in January, the pattern has been to do a quick and sudden turn around every time equities look bullish or bearish.
The movie The Hunt for Red October describes a maneuver called a “crazy Ivan” when a submarine would all of a sudden change its direction and turn around to see who was behind them. Well, these stock markets do the same; while they are going down, they will quickly reverse to run buy stops, and while they are moving up, they will do sudden downside reversals.
Today, the ESM18 made a new ten-week high in the overnight session, but then it began to sell off and this morning it has continued to look weak. The economic calendar is a non-factor today, and as we have reached the middle of an already slow week, we think it will be quiet.
We are looking to buy dips in this market but we don’t want for any crazy Ivans to knock us down and out. So here is what we are watching for today. On the hourly candlestick chart, the green trend line connects last week’s low to a series of higher lows and is now in play at the 2749 price.
It’s important either for bulls to hold this trendline or for bears to break it. Currently below that line is the orange shaded region on the chart, which reflects the price area beginning with 2741.75 and extending down to 2736.25. This area served as resistance for several sessions in late May and then offered some support yesterday. It’s vital for bulls to hold this area. As long as price remains above this zone, we expect the uptrend to continue; but if the market moves below that level, we would become neutral.
Today’s Economic Calendar:
- Bank Reserve Settlement
- MBA Mortgage Applications 7:00 AM ET
- International Trade 8:30 AM ET
- Productivity and Costs 8:30 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- Treasury STRIPS 3:00 PM ET