Emini Futures Trading Analysis- 05May2017

spx-weekly-chart-05may2017

Notes: The above weekly chart is indicating an upmove above 2400 in the coming days/weeks. Major supports on this weekly chart are visible at 2350 and 2200 levels. There is a decent probability of a retest of 2200 sometime in the next 6-12 months, because 2200 was not tested properly on the way up, and the S&P500 usually tests each key level multiple times before making long term upmove above that level.

[Bonus Trade] Buy S&P500 Emini Futures at 2380 for target 2400, with Stop loss 2370. This trade offers 20 points gain with 10 points risk, which is a good deal in a market with positive bias.

Technical Analysis: Many technical indicators are indicating an overbought market in the short term, but with clear possibility of higher prices in the coming weeks. 2400 is most likely to be crossed again. One concern is that volume is not rising with new highs, which means that these higher levels are not getting market-wide participation, and therefore we may see some correction in order to get new investors on board.

Moving Average Indicator: The market is bullish because the fast moving average is above the slow moving average. Everything in this indicator is pointing to higher prices.

Momentum Indicator: Momentum (32.75) is above zero, indicating an overbought market. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. Momentum is in bullish territory. upmove is likely. And, the market put in a 45 bar new high here. More highs are possible.

Rate of Change Indicator: Rate of Change (1.38) is above zero, indicating an overbought market. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. Rate of Change is in bullish territory. And, the market put in a 45 bar new high here. More highs are possible.

Commodity Channel Index (CCI) Indicator: CCI (101.45) has crossed into the bullish region, issuing a buy signal. CCI will signal liquidation of this position when the CCI value crosses back into the neutral center region. CCI often misses the early part of a new move because of the large amount of time spent out of the market in the neutral region. Initiating signals when CCI crosses zero, rather than waiting for CCI to cross out of the neutral region can often help overcome this. Given this interpretation, CCI (101.45) is currently long. The current long position position will be reversed when the CCI crosses below zero. Adding bullish pressure the market just reached a 45 bar new high.

RSI Indicator: RSI is in neutral territory. (RSI is at 67.79). This indicator issues buy signals when the RSI line dips below the bottom line into the oversold zone; a sell signal is generated when the RSI rises above the top line into the overbought zone. RSI is somewhat overbought (RSI is at 67.79), but given the 45 bar new high here, greater overbought levels are likely.

MACD Indicator: MACD is in bearish territory, but has not issued a signal here. MACD generates a signal when the FastMA crosses above or below the SlowMA. The long term trend, based on a 45 bar moving average, is UP. The short term trend, based on a 9 bar moving average, is UP. MACD is in bearish territory. However, the recent upturn in the MacdMA may indicate a short term rally within the next few bars.

Bollinger Bands Indicator: They are indicating an overbought market. An overbought reading occurs when the close is nearer to the top band than the bottom band. Volatility appears to be picking up a bit, as evidenced by an increasing distance between the upper and lower bands over the last few bars. The market appears overbought, but may continue to become more overbought before reversing. Given that we closed at a 45 bar new high, the chance for further bullish momentum is greatly increased. Look for some price weakness before taking any bearish positions based on this indicator.

Open Interest Indicator: Open Interest is in a downtrend based on a 9 bar moving average. While this is normal following delivery of nearer term contracts, be cautious. Decreasing open interest indicates lower liquidity.

Volume Indicator: The current new high is not accompanied by increasing volume, suggesting that the current move lacks broad participation. Look for a retracement soon. The long term market trend, based on a 45 bar moving average, is UP. The short term market trend, based on a 5 bar moving average, is UP.The current new high is not accompanied by increasing volume, suggesting that the current move lacks broad participation and the market may be overbought. A retracement is possible here.

Stochastic Indicator (Slow): The stochastic is in overbought territory (SlowK is at 86.26); this indicates a possible market drop is coming. The long term trend is UP. The short term trend is UP. Even though the stochastic is signaling that the market is overbought, don’t be fooled looking for a top here because of this indicator. The stochastic indicator is only good at picking tops in a Bear Market (in which we are not). Exit long position only if some other indicator tells you to.

Disclaimer: The above analysis is meant solely as a training tool for the understanding of technical analysis of the S&P500 Emini Futures. It is not designed to provide any investment advice.

 

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