Thursday's Market Minute: Bullish Signs of Life in the /ES

S&P 500 futures enjoyed a more than +6% move off Monday’s new yearly low as of yesterday’s close, but the gains started to stall out yesterday. The rally off the lows was strong, but markets are by no means out of the woods yet as we head into tomorrow morning’s Jobs Report.

This week’s bullish move propelled the /ES above the 3,800 level but yesterday it stopped just a hair below a key resistance level in the 21-day Exponential Moving Average. The upside move was enough for the contract to log a bullish crossover yesterday on the MACD, which measures momentum, despite closing lower. This suggests a potential trend shift, as does the bullish Parabolic SAR crossover – another indicator traders use to assess trend direction. There are other signs that the price action of the /ES may be strengthening. The RSI (another momentum indicator) showed bullish divergence from price during recent weeks, meaning price was making lower lows but RSI was making higher lows which suggests the contract was building up some steam. The Average Directional Index, also known as the ADX, is heading downward from a peak which typically would be interpreted as a weakening downtrend.

All this may sound like good news for the bullish crowd, but these indicators share a common weakness; they lag changes in price. The strong rally markets saw this week may have been enough to trigger these technical indicators, but price needs to make a convincing move above the 3,800 level and this hasn’t happened. The 21-day EMA is the point to watch to the upside, which is currently near about 3,820. Just beyond that, the yearly Linear Regression Line near 3,852 is another potential stalling point. Price previously bottomed out just below 3,600, which is a support point to monitor. 

Image sourced from Shutterstock

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.