Strong Lows Suggest Strength In S&P

The S&P 500 futures SPM have formed strong lows after each pullback over the last month of trading, which could be a sign that further strength lies ahead.

Still in Compression Phase

The E-mini S&P 500 futures ESM continue to trade within a multi-month phase of compression, which will eventually lead to the next significant phase of expansion. In February, I provided an ABCD measured move target of 1937.75 (adjusted for the June contract), with the expectation that the target would be hit sometime in the May/June timeframe. While price remains on track to reach this target, the ES is yet to break free from its current phase of compression, which means further development could be seen before expansion occurs.

Watch 1887 and 1860

While the ES has formed a large trading range from 1803.25 to 1892.50, price is beginning to coil within an even tighter price range from 1860 to 1887, which has developed over the last two weeks. The 1860 level offers solid support, as price rallied off this level during Monday’s session, leaving behind a strong low. As a matter of fact, 1860 is the third strong low that has formed since mid-April, with the others at 1803.25 and 1844. Strong lows are often represented as well-rejected price levels that trigger powerful reversals, and oftentimes these levels remain untested for some time.

These series of lows actually imply further strength, so as long as 1860 remains intact price is likely to continue on an upward trajectory. Watch 1887 for signs of follow-through that could eventually lead the ES to the 1937.75 target we issued in February, with upside scaling targets at 1893.25 and 1904.

Otherwise, failing to hold above 1860 could trigger selling pressure into the center of the range at 1846.75, with a shot at reaching downside targets at MCVAL at 1831.25 and the 1800 LVN.

Follow Value

The ES continues to bounce between 1828.50 (CVPOC) and 1865.25 (MCVPOC), which are both considered high volume nodes (HVNs). Currently, the 1865.25 price has been the value level to watch lately, as responsive buyers rushed to defend price levels below 1865.25 during Monday’s trading. If price continues to “go bid” at or below 1865.25, look for an eventual test of 1887, which could open the door to much higher price levels.

Otherwise, if 1865.25 “goes offered” it could be an indication that price is headed back to prior value at 1828.50.