E-mini S&P 500 Index (ES) Futures Technical Analysis – Test of 4040.75 – 3994.00 Could Bring in New Buyers

June E-mini S&P 500 Index futures are trading at their low of the session shortly before the cash market close on Wednesday. Weakness in the technology sector is behind most of the selling pressure. The catalyst behind the move was key inflation data that showed higher-than-expected price measures.

At 19:33 GMT, June E-mini S&P 500 Index futures are at 4059.00, down 87.25 or -2.10%.

The selling intensified after the S&P 500 fell below Tuesday’s low, a level traders were watching closely because of the intraday rebound one day ago. Once the S&P fell below that low about an hour into the trading day, the benchmark dropped even further.

Shortly before the cash market opening, the government released a report that showed consumer inflation accelerated at its fastest pace since 2008 last month with the consumer price index (CPI) spiking 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase. The monthly gain was 0.8%, versus the expected 0.2%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out the swing bottom at 4120.50. A move through 4238.25 will change the main trend to up.

Even before the trend changed to down, the momentum had shifted to the downside with the formation of a potentially bearish closing price reversal top on Monday. When confirmed, this chart pattern tends to trigger a 2 to 3 day correction. So this sell-off is not really a surprise.

The short-term range is 3843.25 to 4238.25. Its retracement zone at 4040.75 to 3994.00 is the primary downside target area.

Short-Term Outlook

Investors will have a big decision to make on a test of 4040.75 to 3994.00. We expect to see aggressive counter-trend buyers come in on a test of this area. This could trigger the start of a 50% to 61.8% retracement of the plunge from 4238.25.

If 3994.00 is taken out with conviction then look for the selling to possibly trigger another acceleration to the downside with the next major target coming in at 3843.25.