E-mini S&P 500 Index (ES) Futures Technical Analysis – Powell Needs to Explain Recession Risks
September E-mini S&P 500 Index futures are under pressure early Wednesday after the benchmark index jumped in the previous session with investors attempting to claw back some losses from last week’s rout.
Some of the early session weakness is likely being fueled by position-squaring ahead Federal Reserve Chairman Jerome Powell’s testimony before the Senate Banking Committee Wednesday morning.
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Traders already know the Fed’s intentions because they’ve been broadcast all over the news. What they don’t know is how Powell is going to raise rates and drive down inflation without causing some damage to the economy. Powell may be asked about the odds of a recession. His answers could be market moving events.
The index is also being dragged lower as Asian stocks slipped in volatile trading on Wednesday, failing to extend Wall Street’s rally as persistent worries about interest rates and inflation remained a key focus for investors.
At 06:33 GMT, September E-mini S&P 500 Index futures are trading 3720.75, down 47.25 or -1.25%. On Tuesday, the S&P 500 Trust ETF (SPY) settled at $375.08, up $9.22 or +2.52%.
Tuesday’s Recap
The benchmark futures contract finished sharply higher on Tuesday as investors attempted to recapture some of last week’s losses. Following a long U.S. holiday weekend, yesterday’s gains were fueled by beaten-up shares of mega cap growth and energy companies. Both sectors were hit hard last week.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 3639.00 will signal a resumption of the downtrend. A move through 4204.75 will change the main trend to up.
The minor trend is also down. A trade through 3843.00 will change the minor trend to up. This will shift momentum to the upside.
The minor range is 3843.00 to 3639.00. The index is currently straddling its pivot at 3741.00.
The short-term range is 4204.75 to 3639.00. If the minor trend changes to up then its retracement zone at 3922.00 to 3988.75 will become the primary upside target.
Daily Swing Chart Technical Forecast
Trader reaction to the minor pivot at 3741.00 is likely to determine the direction of the September E-mini S&P 500 Index on Wednesday.
Bearish Scenario
A sustained move under 3741.00 will signal the presence of sellers. If this creates enough downside momentum then look for a fast break into another minor pivot at 3711.25. If it fails then look for the selling to possibly extend into the main bottom at 3639.00.
Bullish Scenario
A sustained move over 3741.00 will indicate the presence of counter-trend buyers. This could trigger a surge into the minor top at 3843.00.
Side Notes
Today’s price action is likely to be headline driven. If Powell comes across as hawkish then stocks could resume their sell-off. If Powell can convince investors of a “soft-landing” then look for a short-covering rally.