E-mini S&P 500 Index (ES) Futures Technical Analysis – Facing More Selling Pressure from Fed tightening.

September E-mini S&P 500 Index futures finished higher on Friday in a volatile session, with the benchmark index moving back and forth across the break-even line, after posting a sharp decline the previous session.

The volatility in the market was likely fueled by the “quadruple witching”, which refers to the simultaneous expiration of stock index futures, single-stock futures, stock options and stock index options.

On Friday, the September E-mini S&P 500 Index settled at 3675.75, up 4.50 or +0.12%. The S&P 500 Trust ETF (SPY) closed at $365.84, up $0.77 or +0.21%.

Industrial Production, Leading Indicators Weaken

In U.S. economic news, the Federal Reserve released a report showing industrial production increased by less than expected in May. A separate report from the Conference Board showed a continued decrease by its reading on leading U.S. economic indicators last month.

More Downside Likely

Although the economic data was weaker-than-forecast, there was little in the reports to suggest a recession was imminent, or dissuade the Federal Reserve from pressing ahead with more aggressive policy tightening.

Fed Chair Jerome Powell also added on Friday that the central bank is acutely focused on returning inflation to its 2% mandate. This essentially confirms that higher rates are on the horizon.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the closing price reversal bottom suggests momentum may be getting ready to shift to the upside at least temporary.

A trade through 3639.00 will negate the chart pattern and signal a resumption of the downtrend. The main trend will change to up on a trade through 4204.75.

The minor trend is also down. A trade through 3843.00 will change the minor trend to up. This will shift momentum to the upside.

The minor range is 3843.00 to 3639.00. Its pivot at 3741.00 is resistance and the next potential upside target.

The short-term range is 4204.75 to 3639.00. If the minor trend changes to up then look for a test of its retracement zone at 3922.00 to 3988.75.

Short-Term Outlook

Trader reaction to 3741.00 is likely to determine the early direction of the September E-mini S&P 500 Index on Monday.

Bullish Scenario

A sustained move over 3741.00 will indicate the presence of buyers. If this move creates enough upside momentum then look for a near-term surge into the minor top at 3843.00.

Bearish Scenario

A sustained move under 3741.00 will signal the presence of sellers. If this generates enough downside momentum then look for a retest of Friday’s low at 3639.00. If it fails then the selling is likely to extend into the February 1, 2021 main bottom at 3614.75.