Range Bound Session Setting up For Bigger Move

Range Bound Session Setting up For Bigger Move

A highly volatile overnight session that continued into the pre-market session set the tone for what is lining up to be another volatile week. In the S&P 500 futures, the range became established between the psychological level of 4,000 and the 50-day Simple Moving Average (SMA) of around 4,030. Higher volatility should be expected with many economic events that can shake up the market this week. After this pre-market range had been established, most of the price movement in the market was contained within it for today’s trading session. 

When the opening bell sounded, an early attempt to break the top of the range failed as selling volume stepped in again near the 50-day SMA. Using the pre-market high and the 50-day SMA level has created a strong resistance zone on the S&P 500 futures chart. As the selling pressure began to mount, the market fell toward the lower part of the range.

At the psychological level of 4,000, buying volume stepped in heavily to stop the downward action seen across the market. The 4,000 level and the 21-day Exponential Moving Average (EMA) at 4,993 can create a significant support zone. Taking note of how volume has stepped into the market around these levels has validated the importance of this range in which the market is currently trading. 

During a volatile week, it can be typical for the market to trade in a range until the information is digested from the anticipated catalyst. The remaining hours of the trading session were spent within the range, giving a good foundation for the upcoming sessions. 

Comparing the Indices

The Nasdaq, which has carried the market on its back during the recent surge higher, appeared to find exhaustion and took the day off today. Comparatively, a rotation has taken place, and the Dow Jones futures have begun to take the reins and strengthen the market. Today, the Nasdaq was willing to let the market move lower, being the only index to close negative. The Dow Jones saved the market for the time being, but this can change quickly with a heavy catalyst on the financial sector looming. 

Tomorrow’s Economic Events

Tomorrow the first event to be aware of is the U.S. Consumer Confidence report at 10 a.m. Eastern. This report will give the general public a consensus on consumers’ broad overlook of the current economy. As this is being reported, the testimony on banks to the Senate by the Federal Reserve (Fed) by Gov. Barr will be taking place. As Barr is speaking, there will be an elevated emphasis on the financial sector and the Dow Jones futures. 

Where Does This Leave the Market?

As of now, a range has been established and will be respected in such a manner. Volatile non-directional moves can be expected between 4,000 and 4,030. However, there are reasonable targets above and below the range once the energy being built up is released. 

Above 4,030, the three targets higher would become the mini psychological level of 4,050, last week’s high at 4,073.75, and a significant psychological level at 4,100. 

Below 4,000, there are plenty of moving averages to target. There is the 15-day SMA at 3,968, the Point of Control (POC) at 3,954, and the 200-day SMA at 3,943. 

Divergence in Indexes to Close the Session

The Nasdaq closed negative today, while the S&P 500 was positive to close the session. The S&P 500 futures closed up 0.22%, adding 9 points, while the Nasdaq futures closed down 0.67%, losing 86 points. The Dow Jones futures led the charge today, closing up 0.70%, an additional 228 points.