Friday the S&P 500 mini futures contract (ES) briefly penetrated the first major support range 1050-48, and bounced from the lower consolidation range 1036-38. Buying picked up as the price returned to 1050 and ES closed above this major support line, but under the 9-day moving average line. As long as price doesn’t break below 1036.50, ES will remain inside its broad consolidation range.
Today ES could pull back down to the 1056-54 range in the early morning or overnight. As long as this range holds, a bounce up to 1071-73 should be expected, and we could see a further bounce to 1093-95 range (the maximum) later this week. After the bounce completes, the next decline should follow.
TRADING STRATEGY FOR Aug. 30, 2010
Today an attempt to fill the 1065.50 gap should be expected, and the gap area will become today’s key area 1066.50-1064.50. A move above it will encourage pre-holiday buyers to push the price up further. A failure to break above that key area could lead price down.
ES has a downtrend channel on the 60min chart. The key line is also around 1066.50-68.50 range, which overlaps the previous gap area. A break above 1068.50 will be bullish. Upside momentum could push price up to 1075-78 or higher to 1081-85 range (short entry). If we fail to break above 1068.50, price could pull back down to 1056-54 range for testing. A move below 1047.50 will be bearish. A shakeout move down to 1037-35 could follow.
ESU0 Intraday chart – 60 minute bars
