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S&P Takes Next Peak/Correction Step; Beware

Posted 05/07/2019 7:44AM CT | RJO Market Insights

In Thur’s Technical Blog we discussed a very, very minor scale momentum failure that was grossly insufficient to conclude anything more than an interim corrective hiccup.  But the fact that it occurred in the immediate area of 21Sep18’s former 2947 all-time high and still-arguable upper boundary to an 8-month range should raise some eyebrows.  Yesterday’s subsequent break below Thur’s 2901 initial counter-trend low AND 18-Apr’s 2889 next larger-degree corrective low and our short-term risk parameter exhibits another level or weakness and developing vulnerability.  This follow-up weakness confirms a bearish divergence in momentum that defines 01-May’s 2961.25 high as one of developing importance.  Per such we are identifying 2962 as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively base non-bullish decisions like long-covers and cautious bearish punts.

E-Mini S&P 500 240 Minute Chart

 

E-Mini S&P 500 Daily Chart

The daily log chart above shows the confirmed bearish divergence in momentum as a result of yesterday’s failure below 2889.  Relative to Dec-May’s entire uptrend from 2317 to 2961, this mo failure is still not of a scale sufficient to conclude anything more than an interim corrective setback.  Indeed, commensurately larger-degree weakness below 25-Mar’s 2789 next larger-degree corrective low remains required to, in fact, break the major 4-month uptrend.  Per such, this 2789 level remains intact as our key long-term risk parameter to a still-advised bullish policy for longer-term players.

E-Mini S&P 500 Weekly Chart

The fact that this market is flirting with Sep’18’s previous 2947 all-time high and resistance is compelling and scary, especially when one considers this market’s  dubious performances (circled in the monthly log chart below) after breaking out to new all-time highs over the past 10 years.  Perhaps the sentiment/contrary opinion fact that this market is far from frothy bullish conditions that have contributed to broader peaks in the past will defer such a threat until greater heights are achieved.

Regardless and in sum, the market has rejected/identified a high of developing importance at 2961 that is pertinent to shorter-term traders with tighter risk profiles.  Until and unless the market recoups 2962, we believe this market is vulnerable to at least a smaller-degree correction for which a neutral-to-cautiously-bearish stance is preferred for shorter-term traders with tighter risk profiles.  By contrast, a bullish policy remain advised for long-term players with a failure below 2789 still required to threaten this call enough to warrant its cover.  In effect, we believe the market has identified 2962 and 2789 as the key directional triggers heading forward.

E-Mini S&P 500 Monthly Chart

RJO Market Insights