Thursday's Market Minute: S&P Futures Show Weakening Technicals

S&P futures slipped more than 1.3% in the overnight session, and are now near the same levels as the lows from late June and early July around 3,745. There’s little to suggest the /ES has exited its bear market as price continues to trend downward and the contract is trading below most of its commonly followed moving averages, so be careful if price drops past these lows.

There are some interesting technical developments to note. One is that the Average Directional Index (ADX) is turning upward from a low point, which suggests a strengthening trend. The ADX is different from many indicators in that it’s ambivalent about the direction of the trend, and only factors the strength of that directionality. High levels mean a strong trend, while low levels mean a weak trend or no clear direction at all. The ADX is currently still at a fairly low level, but the upturn is nonetheless potentially important.

Another thing to consider is the Moving Average Convergence Divergence (a.k.a. MACD, which measures momentum) is getting close to making a bearish crossover, while the Parabolic SAR (used to set stops and determine trend direction) is shifting to the bearish side today as well. While these developments are worth noting, it’s important to remember to not jump the gun on trading signals – wait for them to actually complete at the close, because things can turn around during the intraday session.

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