Monday's Market Minute: S&P Futures Sluggish, But Big Week Ahead

S&P 500 Futures were little changed on Friday, but earnings season will kick into high gear this week so traders had better be ready for some action. The price movement was interesting on the /ES, as the contract lifted into new yearly highs on Jul. 19, but also failed to convincingly break out of the upward channel that it has traded within beginning in early March. Nonetheless, things look pretty strong.

Major moving averages are still trending upward and the /ES has far outpaced most of them. Look for shorter-term moving averages, like the 21-day Exponential Moving Average, to provide support during any downtrends. Also, keep an eye on the slope of these shorter term moving averages, as a shift from trending upward to flattening or even angling downward could be a warning sign for potential trend change. 

Momentum according to the Relative Strength Index (RSI) is high, but slipped out of the overbought area. This is a bearish signal, but given that Friday was a rather lackluster trading day in general that saw little in the way of earnings or economic data, traders may want to wait to see how today plays out before making any big decisions based on momentum. Beware of bearish divergence, meaning watch out for price making new closing highs but the RSI trending down, as this could be a warning sign for trend.

Standard Deviation Channels can be useful for assessing potential resistance in situations where trading products are making new highs. This study takes standard deviations away from a Linear Regression Line (line of best fit based on closing prices) to extrapolate channels and help gauge how extreme a price move is relative to its own history. The /ES is currently between +1 and +2 standard deviations, with resistance at the +2 channel near 4,725 and support at the +1 channel near 4,511. Just below, we also have the old double-top highs near 4,492 and the 21-day EMA near 4,498, so there’s several sources of potential support if price starts to falter.

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