After a brief bounce Wednesday afternoon, there was no follow through Thursday. ES gave back all Wednesday’s gain and closed below the major support zone 1050.50-1048.00.
Today (Friday) a key economic report on GDP will be released at 8:30 am EDT and Federal Reserve Chairman Bernake will give his speech on the economy at 10 am. After those two are done the market should have some action around 1041, a make-or-break level for the ES. If 1041 holds, some hope remains for a further bounce; if we break down 1041, there are further declines in store.
The short-term is oversold, but the GDP numbers and Bernake’s speech can still push the price lower. Investors are starting to believe that the Fed is not going to be able to restart the economy, no matter what measures it takes, and the Fed’s credibility with the market is being questioned.
The ES has had an orderly sell-off so far, and we have not made a definitive break through the lower consolidation range boundary. But the fundamentals do not support the market, and the technical indicators point to a major downtrend. We don’t see much upside potential for this market.
ESU0 Daily chart
