The direction of the September E-mini S&P 500 Index on Tuesday is likely to be determined by trader reaction to the 50% level at 3389.25.
September E-mini S&P 500 Index futures are trading sharply lower shortly after the cash market opening Tuesday. Traders returned from a long U.S. holding weekend with selling on their minds, continuing last week’s steep retreat. A sell-off in several tech heavyweights led the market lower.
Mounting tensions and concerns over a rocky economic rebound are being blamed for triggering the start of the selling as well as just generally overbought conditions.
At 13:30 GMT, September E-mini S&P 500 Index futures are trading 3363.50, down 54.00 or -1.58%.
The main trend is up according to the daily swing chart, however, momentum is trending lower. The main trend will change to down on a move through the nearest main bottom at 3195.00. A trade through 3587.00 will signal a resumption of the uptrend.
The minor range is 3344.75 to 3587.00. Its retracement zone at 3437.25 to 3466.00 is new resistance.
The first short-term range is 3191.50 to 3587.00. Its retracement zone at 3389.25 to 3342.50 is currently being tested.
The second short-term range is 3105.25 to 3587.00. Its retracement zone at 3346.00 to 3289.25 is the next downside target area.
The two short-term retracement zones create a potential support cluster at 3346.00 to 3342.50. We could see a technical bounce on the first test of this area.
Based on the early price action on Tuesday, the direction of the September E-mini S&P 500 Index the rest of the session on Tuesday is likely to be determined by trader reaction to the 50% level at 3389.25.
A sustained move under 3389.25 will indicate the presence of sellers. The first downside target is the potential support cluster at 3346.00 to 3342.50. Watch for a technical bounce on the first test of this area. If 3342.50 fails as support we could see a near-term acceleration into the Fibonacci level at 3289.25.
A sustained move over 3389.25 will signal the presence of buyers. This could create a labored rally with potential upside targets coming in at 3437.25 and 3466.00.
Overtaking 3466.00 could trigger an acceleration to the upside.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.