ES made a drastic gap lower at the open based on continuing concerns about the fiscal health of the euro zone. Later comments from Federal Reserve Chairman Bernanke also made a contribution to the selling pressure. At the end ES gave up 7 points.
Based on the daily chart, ES remains inside the 20- and 40-day moving average lines. Yesterday ES had an inside day move to repeat its previous day’s range. The inside day move indicates a contraction in price and that price pressure will be released in the following days. It can drive the price in either direction.
This is the first day of December and the market bias will favor the upside, but the daily chart shows there is a great chance for ES to breakdown the neckline of the H&S pattern.
Today we should pay attention to the daily pivot level. If the price goes high first and is repelled and later drops back through the daily pivot, it is likely for ES to break down and continue lower. If the price goes low first and is repelled, then later moves up through the daily pivot level, it is likely for ES to break out and continue higher.
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ESZ0 Daily chart
ESZ0 Intraday – 60-minute bars
