The bounce from last week’s awesome destruction in the S&P500 mini-futures (ES) stalled Monday at the 10-day moving average line, the first of the resistance levels we identified in our weekend report. The futures closed at 1969.25, down 20.50 points for the day and 129.25 points for the month, the biggest monthly loss in five years.
Fear of slow growth in China continues to haunt many investors, although there should not be much market news out of China this week. The Chinese are celebrating the victory over Japan in WWII on September 3, with large-scale military parades. The markets will be a secondary consideration.
The major consideration for the US markets will be the two jobs reports on Wednesday and Friday, and the usual gnomic utterances from Fed officials about a September interest rate increase. The market rates the likelihood of an increase at about 35%. Our guess is no action now. The next FOMC meeting coincides fairly closely with rollover day for the futures, so there could be a little disruption around Sept. 15. Wait and see.
Today
Tuesday, the 1961-59.25 zone will be very important for traders. A move below it could run buyers’ stops and push the price further down. The minis sold off in the early after-hours trading, so there could be a struggle to get back above that area on Tuesday.
The market may just test the support and resistance areas – the inflection points we identified yesterday – before the Fed makes its final decision on a September rate hike. Our strategy for today should be “short on the bounce.”
The major support levels for Tuesday: 1850-45, 1828.50-25, 1803-1799.50;
the major resistance levels: 1992.75-95.50, 2012.50-2013.50 2032-2035
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