Thursday's Market Minute: Equities On The Brink

Last week’s bullish surge in equities was halted as major U.S. indices fell sharply on Tuesday. The S&P 500 futures contract stumbled near 2930, the second time the recent rally failed at a convincing break above the 252-EMA.

The /ES has been trading in a tightening range all month, failing to make new highs or new lows since April 30. Technicals suggest the S&P’s momentum may be slowing, as it completed a bearish MACD crossover yesterday while the RSI started making new lows this week while price did not – a sign of negative divergence that suggests weakness.

Yesterday also saw heavy volume, logging both the highest daily count and the first breach of its 50-SMA since March 25. A volume spike often can be a precursor to a breakout, particularly in range-bound price environments. Bulls likely will need a strong close above the 252-EMA to fan the flames of a new leg up, with possible resistance at the previous highs near 2947 and the late April highs around 2960. Important price levels to the downside include the previous lows from May 4 at 2771, as well as the 50-day SMA near 2703.