E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 2849.50, Weakens Under 2841.25

The e-mini futures contract which represents the benchmark S&P 500 Index is trading lower during the pre-market session. A steep sell-off in Facebook shares is spreading to other major technology-related stocks, dragging down the S&P 500 Technology sector.

At 0637 GMT, September E-mini S&P 500 Index futures are trading 2835.25, down 6.00 or -0.21%.

After the closing bell on Wednesday, Facebook announced disappointing quarterly earnings results. This led to a massive sell-off in its stock during the after-hours session. Given the early move, the company is on track to lose more than $125 billion in market value. This represents about a fifth of its value.

Other big technology stocks are also getting hit by a wave of selling pressure. Apple lost about 1 percent. Amazon, which reports after the bell Thursday, lost 2.3 percent. Netflix, which disappointed investors last week, was down about 3 percent in the after-hours market. Finally, Google parent Alphabet fell 2.4 percent.

The reaction to the Facebook miss is not that great in the S&P Index compared with the NASDAQ Composite. The so-called FAANG stocks – Facebook, Apple, Amazon, Netflix and Google (Alphabet) make up about 11% of the S&P 500 Index. In the NASDAQ, the weightings are as follows:  Facebook 6.026 percent, Apple 11.102 percent, Amazon 10.388 percent, Netflix 1.818 percent and Google (Alphabet) 5.097 percent.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The index is currently trading inside yesterday’s range. This indicates early trader indecision and impending volatility.

A trade through 2849.50 will signal a resumption of the uptrend. A move through 2792.50 will change the main trend to down. Minor bottoms come in at 2789.75 and 2765.75.

The short-term range is 2792.50 to 2849.50. Its retracement zone at 2821.00 to 2814.25 is the first downside target. Since the trend is up, buyers could show up on the first test of this zone.

The main range is 2693.25 to 2849.50. If the trend changes to down then we could see a test of its retracement zone at 2771.25 to 2755.25. Even with the change in trend, buyers could still come in on a test of this zone because it represents value.

The Major Contract Retracement Zone is 2755.25 to 2713.75.

Daily Swing Chart Technical Forecast

Although the index gapped the close early Thursday, trading has been light and the range tight. No significant support, lows or bottoms have been violated so the uptrend remains intact. Therefore, the direction of the September E-mini S&P 500 Index on Thursday is likely to be determined by trader reaction to yesterday’s close at 2841.25 and yesterday’s high at 2849.25.

A trade though 2849.25 will signal a resumption of the uptrend. If this generates enough upside momentum then this should put the index in a position to challenge the January 29 top at 2889.00 over the near-term.

A trade through 2849.25 then a break back under 2841.25 will indicate that the selling is greater than the buying at current price levels. This will put the index in a position to form a potentially bearish closing price reversal top.

The inability to overcome 2841.25 or 2849.25 will also signal the presence of sellers, but without the potential for a closing price reversal top.