E-mini S&P 500 Index (ES) Futures Technical Analysis – Friday’s Reversal Top Suggests Emergence of Sellers

September E-mini S&P 500 Index futures posted a potentially bearish closing price reversal top on Friday after touching another record high earlier in the session. The price action reflected the mixed sentiment stemming from a disappointing U.S. jobs report, which raised fears about the pace of economic recovery but weakened the argument for near-term tapering from the Federal Reserve.

On Friday, September E-mini S&P 500 Index futures are trading 4534.50, down 0.75 or -0.02%.

The benchmark index had scaled all-time highs over the past few weeks on support from robust corporate earnings, but investors have remained generally cautious as they watch economic indicators and the jump in U.S. infections to see how that might influence the Fed and its tapering plans.

Reflecting those concerns over the jump in U.S. COVID-19 cases, among the biggest drags on the S&P 500 Index were cruise ship operators. Norwegian Cruise Line Holdings, Carnival Corp and Royal Caribbean Cruises all fell between 3.4% and 4.4%.

A majority of the 11 S&P sectors closed down, with the utilities index the worst performer at 0.8% lower. Economically-sensitive manufacturing and industrials slipped 0.7% and 0.6% respectively.

Banking stocks, which generally perform better when bond yields are higher, dropped 0.4% even as the benchmark 10-year Treasury yield jumped following the report.

Daily September E-mini S&P 500 Index

Daily September E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, Friday’s closing price reversal top suggests momentum may be getting ready to shift to the downside.

A trade through 4519.25, when the index resumes trading on Tuesday following Monday’s U.S. Labor Day holiday, will confirm the closing price reversal top. This won’t change the main trend to down, but it could trigger the start of a 2 to 3 day correction.

A move through 4549.50 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor range is 4462.25 to 4549.50. Its retracement zone at 4505.75 to 4495.50 is the nearest downside target. Since the main trend is up, buyers are likely to come in on a test of this area.

Short-Term Outlook

The direction of the September E-mini S&P 500 Index early Tuesday is likely to be determined by trader reaction to 4534.50.

Bullish Scenario

A sustained move over 4534.50 will indicate the presence of buyers. If this move creates enough upside momentum then look for buyers to challenge 4549.50. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 4534.50 will signal the presence of sellers. Taking out 4519.25 will confirm the closing price reversal top. This should generate enough downside momentum to extend the selling pressure into 4505.75 to 4495.50.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire


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