E-mini S&P 500 Index (ES) Futures Technical Analysis – Trouble Ahead if 4421.50 Fails as Support

September E-mini S&P 500 Index futures are set for a cautious open on Friday, as a solid rise in jobs in July sparked concerns of higher inflation at a time when the Delta variant of the coronavirus has cast a shadow over a broader economic rebound.

At 13:28 GMT, September E-mini S&P 500 Index futures are trading 4426.75, up 5.25 or +0.12%.

The Labor Department’s report showed nonfarm payrolls increased by 943,000 jobs last month amid demand for workers in the labor-intensive services industry, higher than economists’ expectation of 870,000.

The cautious reaction in the stock market suggests traders are a little nervous about the strong jobs report moving the Fed closer to tightening policy.

“This good news brings pain for the bond market; the dollar will strengthen and yields will go up and that could cap stocks a bit,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 4429.50 will indicate the buying is getting stronger. A move through 4224.00 will change the trend to down.

A change in trend to down is highly unlikely but due to the prolonged move up in terms of price and time, the index is ripe for a potentially bearish closing price reversal top.

The minor trend is also up. A trade through 4364.75 will change the minor trend to down.

The minor range is 4264.75 to 4429.50. Its 50% level or pivot comes in at 4397.00. This level will move up as the index moves higher.

The short-term range is 4224.00 to 4429.50. If the minor trend changes to down then look for a pullback into its retracement zone at 4326.75 to 4302.50.

Daily Swing Chart Technical Forecast

The direction of the September E-mini S&P 500 Index on Friday is likely to be determined by trader reaction to 4421.50.

Bullish Scenario

A sustained move over 4421.50 will indicate the presence of buyers. Taking out 4429.50 will indicate the buying is getting stronger. If volume starts to increase then look for a surge through this level. It’s alright to buy strength at current price levels, but there has to be big volume on the bid or the move will fail.

Bearish Scenario

A sustained move under 4421.50 will signal the presence of sellers. The first downside target is 4397.00. Taking out this level will be a sign of weakness with 4364.75 the next likely downside target.

If 4364.75 is taken out with heavy selling volume then look for a short-term break into 4326.75 to 4302.50.

Side Notes

A close under 4421.50 will form a potentially bearish closing price reversal top on the daily chart. If confirmed on Monday, this could trigger the start of a 2 to 3 day correction.