S&P 500 – Taking a Look Forward to Next Week
It’s been another incredible week in the world on e-mini trading. Volume on the ES has sustained itself well above two million contracts daily, and the volatility has been extremely high. For those of you who watch the news, have you noticed a difference in the way the newscasters are speaking now compared to a month ago? In April, it was all great news about how the market was doing “so well”, and how we were “busting out of the bear market with strength”. Psh, I’ve been screaming at people not to get caught up in this emotional bullishness.
Anyways, this isn’t another rant about blind investing or emotional biases. Instead, I want to take a look at where the market could be heading for next week. We’ve had significant sell-offs into very strong levels of support. I think a lot of people are kind of questioning where the market’s going next, so let’s take a look…
Take a look at this 60 minute chart on the S&P 500 e-mini futures contract. Heading into June, we’re stuck in between two important levels: 1,085 and 1,100. The area around 1,085 was acting as a strong level of resistance for over a week before gapping up above it yesterday, which turned 1,085 into support. Yesterday, we also attempted to close the gap down from 5/20 above 1,100. Notice the red shaded area, which is longer term resistance from the beginning of the month.
Eventually, we’ll break out of this range. When we do, I’m looking at two key areas. If we break up above 1,100. we could run to the next level of resistance around 1,120. That level is also confirmed with a trendline of resistance coming down from the highs of the year. If the downside momentum continues, then the next area is around 1,040 – 1,050, which is the low of the year.
There are a lot of people speculating about where this market is headed. For my type of trading (day trading), it really doesn’t matter. Unlike when the market was up around 1200, I can see an argument for both sides of the equation. There has been significant selling from the highs, but we’ve had a strong bounce off of key support areas. Instead of trying to guess, I’m going to enjoy profiting from other traders’ opinions and let them go gray from worrying about the long term direction of the market.
Have a great long weekend and I’ll see you guys next week!
Chris Dunn
