E-Mini Says Today Is Different

Monday, May 23rd 106, was a range bound day for the U.S. equity market. S&P 500 fluctuated between a high of 2055.58 and a low of 2049.06 before breaking down in the last half-hour of NYSE trading to drop to 2047.26.

In the process a symmetrical triangle was formed on 30-minute time frame. This shows an indecision on the part of market regarding it next move. In the last half-hour the index broke to the downside, which is usually a bearish indicator.

However, the day’s price action along with other technical indicators like Stochastics (13, 3, 3) and other markets, was calling for caution. The session-end break down was not followed up in the Asian market trading of S&P futures, instead, the broken symmetrical triangle turned into a horizontal channel.

Within this trading range, a descending triangle started to form. Usually this is a bearish formation except when the breakout happens to the upside. In that case it becomes a failed price-pattern, and that is quite bullish.

Pre-NYSE Open

The European session opened with Germany’s DAX gapping down but then it immediately recovered. Within the first hour of trading DAX turned positive and was soon challenging previous day’s high. S&P futures also turned back up and by 4:00 AM (Eastern Standard Time) they had broken the descending triangle to the upside. This bodes well for the rest of the day’s action on NYSE. By 8:30 AM, the futures have broken the resistance of 2056 – the upper bound of the horizontal channel.

The next major resistance level for S&P futures is 2078 and a minor one at 2070. The corresponding resistance levels for S&P 500 index are 2084 and 2070. There is very high likely hood that the minor resistance levels may be broken by the end of the day. The eMini’s 4-hour chart and S&P 500 1-hour charts are both showing a down-sloping bullish flags. A break to the upside will generate opportunities go a lot higher.