The S&P 500 E-mini contract (ES) hit a ceiling overnight while the pace of the advance slowed, signs that the bulls are hesitating. At miAnalysis I’ve advised swing traders to only act on long set-ups in exchange traded products that pace stocks recently, and I maintain that stance. Whether it’s time to liquidate long holdings in SPY (SPDR S&P 500 Trust) will depend on how ES resolves in the next few hours, as earnings reports come out from DD, LMT, UTX and UPS.
BULL CHANNEL
Gains in ES since 7/17 have extended in a bull channel. Overnight, the contract pressed its 7/17 high of 1694.25 and ultimately attracted selling. Concurrently, the fast average of RSI (dark blue line) put in a substantially lower peak on the 60-minute chart. It wouldn’t take much selling to push price below the floor of the channel, at which point the risk of further selling would increase.
WAIT TO BUY THE DIP
Even if ES breaks down I’ll be advising clients to wait to buy the dip rather than go short. There’s a chance of succeeding on the short side of the market but the odds are against you in such a strong trend. Chart support comes in at 1679.5, based on the highs in mid-July.
