The major indexes all finished at low levels Tuesday, driven down by a devastating drop in July housing sales. The futures gapped down at the open and the gap was not filled. But the ES closed right on the major support zone around 1050, and technically remains inside the broad consolidation range.
At this point it is not clear if a breakdown through the consolidation range will lead to further declines, or if this is a head fake to trap the shorts. We are watching for a price bounce today (Wednesday) and tomorrow to provide direction for the futures.
If the ES makes only a small bounce and remains under 1065.75, we will interpret Tuesday’s decline as the first signal of lower lows coming in the following weeks.
If ES can bounce up to 1095.75 then this decline could be a fake, and ES is likely to bounce back toward the major resistance level near the top band of the consolidation range. From the chart you can see that we have bounced from this support zone several times since May.
ESU0 Daily chart
