Thursday's Market Minute: /ES: Calm Before A Storm?

S&P 500 futures traders saw relatively dull markets during the past 8 days, as prices often hovered near the 4200 level with limited intraday moves mostly confined to a 50-point range. But low volatility is often a harbinger of high volatility down the road as important price levels are established and subsequently broken, which can mean major opportunities for traders as it could signal the beginning of a new trend.

The technical picture shows this type of stagnation, as the /ES has been unable to gain significant ground in either direction away from the yearly Linear Regression Line, currently near 4211. Momentum also shows little conviction in either direction, with last week’s MACD crossover languishing near the zero line, while the RSI continues to squeak into new recent highs with price. The Average Direction Index (ADX), which measures trend strength, peaked on May 3 and has been falling ever since.

The previous highs at 4130 and 4238.50 are the obvious levels to watch for an upside breakout. To the downside, the 4180 level has often been a point of resistance and support during the past couple of months and also shows a major volume node on Volume Profile, so look out for a fall below this point.

Beyond that, the 21-day Exponential Moving Average sits near 4170. Additionally, watch for the ADX to turn upward from a trough on a breakout from these levels in either direction, as this would suggest a strengthening trend.

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