E-mini S&P 500 Index (ES) Futures Technical Analysis – May 31, 2016 Forecast

June E-mini S&P 500 Index futures finished at their highest level since April 20 on Friday, setting up a possible continuation of the rally when the market reopens on Tuesday, following yesterday’s U.S. Memorial Day holiday.

The main trend is up according to the daily swing chart. The market is in no danger of turning the main trend to down, but today is the seventh day up from the last main bottom, which puts the index in a position to form a potentially bearish closing price reversal top. This chart formation could lead to the start of a 2 to 3 day correction.

Based on the close at 2097.25, the direction of the market today is likely to be determined by trader reaction to the downtrending angle at 2098.25.

A sustained move over 2098.25 will signal the presence of buyers. This could drive the market into a long-term uptrending angle at 2104.25.

Crossing to the strong side of the angle at 2104.25 and sustaining this move will put the index in an extremely bullish position. This should easily lead to a breakout rally over the April 20 top at 2105.25 and the May 21, 2015 top at 2105.50.

There is no identifiable resistance over 2105.50 so the only way we’ll know if a top is forming is by watching the chart pattern. The best signs of a top will be a closing price reversal, or an “M” pattern, which will take days to form.

Crossing back under angles will also be a sign that the selling is greater than the buying at current price levels.

The inability to overcome, or sustain a rally over the downtrending angle at 2098.25 will signal the presence of sellers. This could lead to a fast break into the next downtrending angle at 2091.25. This angle is the trigger point for a steep break into the most important support cluster today at 2078.00 to 2077.25. This area must hold, or the chart pattern will fail, signaling a shift in investor sentiment.

Watch the price action and read the order flow at 2098.25 early in the session since this is the last potential resistance angle before the 2105.25 and 2105.50 main tops. Trader reaction to this angle will set the tone for the day.