S&P 500 futures poised pre-Fed
U.S. S&P 500 futures are among the assets poised to react amid any post-Fed decision volatility. The S&P futures’ position may be particularly acute, as shown in the chart below. (Note this is a ‘continuation chart’ constituting prices in a sequence of contracts including the current front month).
The basic pattern on view is a bullish triangle that is already broken. Since the breakout at the beginning of the month, S&P futures have risen for 9 straight days, even if the rise between 11th and 12th June was a mere 0.9 of a point. The subsequent advance underscores momentum. The key question is whether that momentum is now exhausted.
The contract is now close to a confluence of proven resistance. c.2790 equates to highs on 27th February, and the last three trading days including Wednesday, as well as 12th March open. 2790 is associated with fierce reversals, like the one after 27th February that bottomed at 2647 and an even deeper one beginning the session after 12th March that punched down to 2555.5 on 2nd April.
The other markers in the confluence are Fibonacci intervals drawn off the seismic 29th January-6th February collapse between 2878 cycle high and 2531 low. The Fibs are 78.6% (2804) and the lesser-used 76.4% (2796.4).
Hence, whilst the contract is some way off a potentially fearful fate close to the cycle high, S&P futures still challenge critical peaks where they failed in the recent past, with severe punishment.
Other technical clues include the Slow Stochastics momentum oscillator. it was overbought at last check at 93.60/91.33 though the underlying price sustained long episodes in recent history of being as overstretched and more, before destabilisation.
Similarly, 14-day Average True Range trend was declining though still offered a 23-point daily ATR against a move of just approximately 3 on Wednesday.
Longer-term trending pointers like the 200-day moving average and a rising trend line backed the medium term 21-day exponential moving average. All were pointing in the same direction as price. However, as a possible reversion model, 21-DEMA, trading below price for 9 days, was another caution.
In short, conditions for both a volatile break above key resistance and another sharp setback are in place. However, in the event of a benign signal from the Fed—particularly any indication the FOMC is could stick with three hikes in 2018 and not four—could encourage the S&P 500 future to test above current barriers
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