Market Trading Setup for Wednesday, April 15, 2020

Hourly ES S&P 500 Futures Chart

The S&P ES futures have fallen hard after reaching a confluence zone of several trendlines around 2840. At 8:25 AM in New York, we were down nearly 64 points at 2779. That’s in the lower half of an uptrend channel.

There are 3 tests of the uptrend coming up. The first is a trendline at 2755 in the next hour. Then a support level at 2740, followed by a downtrend line at 2728. Each of those should be base for a bounce. If they fail, we’ll be at 2700 in a heartbeat. Traders like to cover shorts at round numbers.

If they don’t, we could be in for an epic collapse. At 2700 the market would complete a top pattern a week in the making. A breakdown would have a measured move target of 2560.

Hourly indicators tuned to a 5 day cycle frequency started to turn bearish yesterday at 5 PM ET. That was quite a nice signal, but unfortunately, I don’t post these reports in the evening. Enough work already.

Those indicators still point down, but they’ve reached the levels of the last minor lows. If the market doesn’t bounce by 11 AM, that would suggest that the most bearish scenario, a drop to 2560, is in play.

Reminder- I’m only talking patterns for a day here. This is not the big picture. 

S&P Futures Daily Chart 

The daily chart gives a broader perspective. The futures have been traded between 2768 and 2835 overnight and in the pre market. The current price is at the bottom of that range. It has broken a 6 day uptrend.

It’s still 50 points above the trendline from the March low. That line is at roughly 2720 today. The next support level is at 2706. Then there’s an apparent support vacuum to 2620, with the next support at 2560, which is also the measured move target of a breakdown, if it happens.

Rate of Change and MACD tuned to an 8 week cycle remain very bullish. Normally I’d say that the benefit of the doubt still goes to the bools here. But in this case, I would defer to what happens at the trendline at 2720. If it holds, then this was just a vicious shakeout, and they could quickly get back to the 2850 area. 

If 2720 breaks, buckle up.

Again, this is for the perspective of one day only. The purpose of these reports is not to divine the longer term.

S&P Cash Index Hourly Chart 

The red bar at the far right shows where the futures traded overnight. It’s between 2768 and 2835. Resistance is indicated at 2835. If they somehow hold the market together, there’s nothing to stop it from returning to that level.

Support is around 2768 and 2720. If they break, then we’d be looking at the 2670 area for trend support. That’s the location of the trendline off the March low today. If it breaks, expect a quick trip to 2600.

The 5 day cycle oscillator will turn down from the third lower high in a huge negative divergence. This could be a case of the third time’s the charm for bears.