E-mini Russell 2000 Index (TF) Futures Technical Analysis – August 10, 2015 Forecast

September E-mini Russell 2000 Index futures closed lower on Friday. During the session, sellers came in to take out and negate the closing price reversal bottom at 1198.70. The selling pressure was weak, however, and the market rebounded after making a low at 1196.30.

Overcoming the previous bottom at 1198.70 suggests the selling pressure was triggered by sell stops rather than fresh shorting. Anyone that shorted weakness through the previous bottom may have been caught in a bear trap. If this is the case then they may be forced to cover, setting up the possibility of a short-covering rally.

On the downside, a sustained move under 1196.30 will be the first sign of weakness. Crossing to the weak side of a downtrending angle at 1194.80 will put the index in an extremely bearish position. There is no identifiable support at this time so traders will have to rely on chart patterns to tell them that a bottom is forming. The two most reliable patterns are a “W” formation and a closing price reversal bottom.

A sustained move over 1196.30 today will signal the presence of buyers. Overcoming the downtrending angle at 1206.20 will signal that the buying is getting stronger. This could trigger an acceleration into the next potential resistance angle at 1218.80.

The direction of the market today will be determined by trader reaction to 1196.30. The first scenario will have sellers driving the market through this level and sustaining the move. The second will be taking out 1196.30 then closing back above it (a potential closing price reversal bottom). The third will be a successful defense of the level and a subsequent short-covering rally.