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E-Mini S&P 500 Futures Outlook

The S&P 500 remains in an uptrend, but here are key levels to keep in mind going forward.

The S&P 500 is moving higher within a channel which extends back to 2012. Support for the channel is just above 1900; if the channel continues that could be a short to medium term buying opportunity. If the price breaks below 1900 the channel will be broken but the uptrend isn't necessarily over. It would take a drop below 1800 to draw the overall uptrend into question.

Figure 1. Emini S&P 500 Futures (ES - September Contract)


Channel resistance is near 2000--and the price is currently consolidating right below it. The tight range through much of June and July could act like a coiled spring though, catapulting the price above 2000 in an "overthrow" of the upper channel line.

Once a trend is well established and has had multiple corrections, when a new decline exceeds the magnitude of pullbacks prior it is a warning sign. A decline of more than 10.5% would be worrisome, since not only would it exceed declines seen over the last three years but would also put the price below the 1800 level mentioned above.

Average True Range is near its lowest levels over the last three years. 10 is usually a low point and then an expansion is volatility is seen. The ATR was near 10 for both June and July and is beginning to creep higher as July ends. This could indicate there will be larger price swings forthcoming.  

Average True Ranges gives an average of the price range the future is covering over a one day period. In this case, the price is currently covering about 14 points of distance from day to day. This can be useful managing trade expectations and establishing stops and targets based on volatility.

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