E-mini S&P 500 Index (ES) Futures Technical Analysis – October 21, 2016 Forecast

December E-mini S&P 500 Index futures are trading lower in response to the weaker trade in Asia. Slightly lower crude oil prices have also been a drag on the index just like they were on Thursday.

Asia is down in reaction to a rise in China’s home prices, which prompted fears of a housing bubble and as a typhoon shut down the Hong Kong market. On top of that, an earthquake hit Japan. European markets, on the other hand, are trading higher, in a delayed reaction to the European Central Bank’s decision regarding its future monetary policy.

Technical Analysis

The main trend is down according to the daily swing chart. A trade through 2168.25 will turn the main trend to up. A trade through 2107.75 will signal a resumption of the downtrend. Momentum may be getting ready to turn down after rising for five sessions. This move may have come to an end when the index found resistance inside a key retracement zone.

The main range is 2182.75 to 2100.25. Its retracement zone at 2141.50 to 2151.25 is the primary upside target. This zone stopped the rally earlier in the week at 2144.50. It is essentially controlling the longer-term direction of the market.

The short-term range is 2107.75 to 2144.50. Its retracement zone is 2126.00 to 2121.75. This zone is the primary downside target. Once again, bullish traders are going to try to form a potentially bullish secondary higher bottom. Bearish traders are going to try to take out this zone in an effort to make 2144.50 a new main top.

Forecast

Based on the current price at 2129.75 (0855 GMT) the direction of the E-mini S&P 500 Index futures contract is likely to be determined by trader reaction to the uptrending angle at 2129.25.

Holding above 2129.25 will indicate the presence of buyers. Overtaking the steep uptrending angle at 2131.75 will indicate the buying is getting stronger. This could generate enough upside momentum to challenge the main 50% level at 2141.50. This is followed by 2144.50 then 2151.25 to 2151.75.

A failure to hold 2129.25 will likely trigger a quick break into the short-term retracement zone at 2126.00 to 2121.75. Then it will be decision time for the bulls and the bears.

Under the zone are Gann angles at 2119.75 and 2114.75, but no major support clusters.

Also watch 2127.00. This is last week’s close. Some investors may try to defend this price in order to force a higher close for the week.

Watch the price action and read the order flow at 2129.25 today. Trader reaction to this angle will set the tone of the market the rest of the session.