E-mini S&P 500 Index (ES) Futures Technical Analysis – Needs Another Dip in Yields to Extend Rally

September E-mini S&P 500 Index futures are inching lower in the pre-market session on Monday after last week’s major turnaround. Despite the technical bounce, the benchmark index is still in a position to post its worst first half of the year in decades.

The major market players are still trying to determine whether stocks have formed a bottom, or if they are just recovering from severely oversold conditions.

At 02:15 GMT, September E-mini S&P 500 Index futures are trading 3908.00, down 8.25 or -0.21%. On Friday, the S&P 500 Trust ETF (SPY) settled at $390.05, up $11.99 or +3.17%.

The index surged on Friday as investors reduced their expectations on Federal Reserve rate hikes amid indications of a slowdown in economic growth. U.S. rate futures priced in a 73% probability of a 75 basis-point increase at the July meeting. For September the market has factored in a 50-bps rise.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through 4204.75 will change the main trend to up. A move through 3639.00 will signal a resumption of the downtrend.

The minor trend is up. It changed up last week when buyers took out the minor top at 3843.00. This shifted momentum to the upside.

The short-term range is 4204.75 to 3639.00. Its retracement zone at 3922.00 to 3988.75 is the primary upside target. It’s also controlling the near-term direction of the index.

Daily Swing Chart Technical Forecast

Trader reaction to 3922.00 is likely to determine the direction of the September E-mini S&P 500 Index early Monday.

Bullish Scenario

A sustained move over 3922.00 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the Fibonacci level at 3988.75. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 3921.75 will signal the presence of sellers. If this move is able to generate enough downside momentum then look for a near-term break into 3780.75.

Side Notes

The retracement zone at 3922.00 to 3988.75 is controlling the near-term direction of the index. Since the main trend is down, sellers are likely to come in on a test of 3922.00 to 3988.75. They are going to try to form a potentially bearish secondary lower top.

Aggressive counter-trend buyers are going to try to drive the index through the Fibonacci level at 3988.75.