Stock Index Futures: Prepare Now For Rollover Day

Thursday

ESU5 – regular trading hours

As we predicted yesterday, the S&P500 e-mini futures (ES) chopped back and forth on Thursday before they settled seven points above the prior close – essentially a market that went nowhere, but covered 30 points of bouncing around in the process.

The reason for this aimless wandering is Rollover Day, when traders start to shift their action to a new contract – in this case December – ahead of the expiration of the current contract (September) next week.

The rollover isn’t quite complete – about half of the usually daily volume is missing – and we’ll see some continued fighting Friday, spurred on by the expiration today of the weekly options on the September contract.

Thursday’s meandering managed to touch some interesting price points:

1961 is a control point for a move higher; yesterday’s high moved above it briefly before dropping back sharply.
In that decline, it almost touched 1934, which is the control point for a further decline toward the 1900 level. It touched, and bounced sharply back up.
So the market hit the top and moved down, then hit the bottom, and moved up. And then it closed two ticks below 1950, which we identified earlier this week as the key line setting the direction of the next move.

Close above 1950, we’ll see that as a signal for a move higher; close below it, we expect a move down. Close right on it, and we can only wait patiently for the market to make up its mind.

Today

We are still trading the September contract (ESU5) today and all of our numbers refer to that contract. If you have already moved on to December (ESZ5) deduct 8 points from everything to get an approximation of the proper position.

There will be confusion and choppiness again today. 1934 remains a key support level; if it is broken, the move to 1900 will not take long.

Major support levels for Friday: 1900-03.50, 1975-80, 1850-45, 1828.50-25;
Major resistance levels: 1992.75-95.50, 2012.50-2013.50 2032-2035

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