E-mini S&P 500 Index (ES) Futures Technical Analysis – Gains Capped after Target’s Margin Warning

June E-mini S&P 500 Index futures are drifting higher on Tuesday after recovering from an early morning setback. Putting a cap on gains shortly after the opening were shares of Target Corp, which fell 4% after the big-box retailer said it would have to offer deeper discounts and cut back on stocking discretionary items.

At 15:18 GMT, June E-mini S&P 500 Index futures are trading 4129.00, up 8.50 or +0.21%. The S&P 500 Trust ETF (SPY) is at $412.71, up $0.92 or +0.22%.

Retail Sector Weakness

Target’s weak outlook weighed on other retail stocks, with rival and Dow component Walmart Inc falling 2.3%. Dollar General, Nordstrom Inc, Macy’s Inc, Costco, Home Depot and Best Buy Co Inc fell between 0.3% and 3.2%.

Broad-based Sectors Decline

Nine of the 11 major S&P sectors declined in the morning trade, with the consumer discretionary sector down 1.5%. Energy climbed 1.2%, while healthcare edged higher.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on May 31.

A trade through 4202.25 will signal a resumption of the uptrend. A move through 3807.50 will change the main trend to down.

The minor trend is also up. A trade through 4071.50 will change the minor trend to down, confirming the shift in momentum.

The main range is 4509.00 to 3807.50. Its retracement zone at 4158.25 to 4241.00 is resistance. This zone stopped the rally at 4202.25 on May 31.

The short-term range is 3807.50 to 4202.25. Its retracement zone at 4004.75 to 3958.25 is the next downside target.

Daily Swing Chart Technical Forecast

Trader reaction to 4137.00 is likely to determine the direction of the June E-mini S&P 500 Index into the close on Tuesday.

Bearish Scenario

A sustained move under 4136.75 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at 4071.50.

A trade through 4071.50 will shift momentum to the downside and could trigger a further break into 4004.75 to 3958.25. Since the main trend is up, buyers are likely to come in on a test of this area.

Bullish Scenario

A sustained move over 4137.00 will signal the presence of buyers. This could lead to a quick test of 4158.25.

Overtaking 4158.25 will indicate the buying is getting stronger. This could trigger a rally into the main top at 4202.25. Overtaking this level will reaffirm the uptrend with 4241.00 the next key target.