E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 3431.75, Weakens Under 3387.00

December E-mini S&P 500 Index futures are trading lower during the pre-market session on Thursday. The move suggests further losses ahead for the benchmark index when regular trading resumes at 12:30 GMT.

I don’t think it’s too early to watch the U.S. stock indexes because they represent risk sentiment, and when they trade lower, appetite for other risky assets declines. Additionally, lower appetite for risk tends to support the U.S. Dollar, which could weigh on other major currencies and gold.

At 08:05 GMT, December E-mini S&P 500 Index futures are trading 3419.50, down 13.00 or -0.38%.

Time is running out on the fiscal stimulus deal. The first deadline passed on Tuesday. A new one was moved to Friday. Equity traders are expressing caution that a deal could get done before the November 3 presidential election.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 3541.00 will signal a resumption of the uptrend. The main trend will change to down on a move through 3198.00. This is highly unlikely but there is room to the downside for a normal 50% to 61.8% correction of the current nearly month-long rally.

The minor trend is down. This is controlling the momentum. The next downside targets are a series of minor bottoms at 3330.50, 3300.25 and 3291.25. On the upside, the minor trend will change to up on a move through 3508.50.

The short-term range is 3576.25 to 3198.00. The index is currently testing its retracement zone at 3387.00 to 3431.75. Trader reaction to this area will determine the near-term direction.

The minor range is 3198.00 to 3541.00. Its retracement zone at 3369.50 to 3329.00 is the next potential downside target and support area. Since the main trend is up, buyers could return on a test of this area.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the December E-mini S&P 500 futures contract on Thursday will likely be determined by trader reaction to the Fibonacci level at 3431.75.

Bearish Scenario

A sustained move under 3431.75 will indicate the presence of sellers. This could trigger a break into a pair of 50% levels at 3387.00 and 3369.50. Watch for buyers.

If 3369.50 fails as support then look for the selling to possibly extend into the Fibonacci level at 3329.00.

Bullish Scenario

A sustained move over 3431.75 will signal the presence of buyers. This could trigger a 50% retracement of the first leg down. This level is 3471.75, but it could come in lower if prices continue to drop.

Overcoming 3471.75 will indicate the buying is getting stronger. This could lead to a test of the minor top at 3508.50.