Emini Futures Trading Analysis- 05Aug2019

The S&P500 futures are at 2835. They have fallen by nearly 100 points today, which is one of the biggest single day fall since Dec 2018, when the S&P500 lost 20% in a month, with almost daily fall. As mentioned earlier, we should not have any long trade below 3000. The August 2019 month started in a similar way, after market topping patters at 3020-3025 level and then a very sharp correction has started last week, with the big fall coming today, because the S&P500 futures have broken their uptrend line today, which has been holding the uptrend since Dec 2018. This is a serious development because the uptrend support line is very important for the uptrend to continue, and as of today, it has failed. Please see the chart below.


The futures have major support at 2790, which is the 200 day moving average, and then the next major support is at 2730, which has acted as a strong support twice in the last 12 months. The current fall will surely test 2790 before any real recovery. The 2800-2790 level should provide a support and create a bounce back to test higher levels, because the S&P500 futures have lost a lot of ground very rapidly, and so only two options are there for the current market condition: (a) we are already in a 2008-like meltdown, or (b) this correction is far-overdone. As of now (a) is not the case, so (b) is the case.

As I mentioned on 22nd July, the 3000-3020 level is a zone of caution, and we did not start any new trade after taking profit at 3020. We still don’t have any clear trade as of now. The sell off has been very sharp, so there will some kind of pull back at some point, which will take out every stop loss on the short trades at current level. And the set up is just not ready for any long trades. So we will just wait and watch for the next couple of days.

Traders should not initiate any long position in S&P500 futures as of now, because the downside targets have not been hit, and they need to be tested once, before any reliable upmove in the futures can come. So from the current level of 2830, we have 40-50 points downside still visible. With the broken uptrend line, the entire rally is at stake here, and the reliable long trades will come only above 2900. As of now, this month August 2019 looks washed out, and we have to see where the support levels come. Please note: the probability of 2900 coming in the next few days is very less, but if it comes in the next 1-2 weeks, then this market is poised for bigger upside.

Here are two Bonus Trades that express our market view in clear terms.
[Bonus Trade#1] Sell SP500 futures at 2840 for Target 2790, with Stop Loss 2880.
[Bonus Trade#2] Buy SP500 futures at 2790 for Target 2890, with Stop Loss 2730.

Update Friday, 9th August 2019:
Both the above Bonus Trades hit their targets from their given entry levels, giving 50 points gain on the downside, and 100 points gain on the upside. The most important point is that the futures managed to come back above 2900 within the same week, which confirmed strong support at 2790 (200 day moving avg) and amazing strength for further upside to new highs. The futures closed Friday at 2922. Keeping 2890 as Stop loss, we should continue trading on long side for target 3000. Thanks.

Comments are closed.