The Battle for Breakout: Will the Market Escape Its Trading Range?

The S&P 500 futures have made a noteworthy move at the beginning of this trading week, which is of interest to investors and traders alike . The levels of 4,000 and 4,030 remained unbroken throughout the overnight session, providing a guide for the cash session as pre-market activity commenced.

At the opening bell, the lower support zone, established by the 21-day Exponential Moving Average (EMA) at 3,993, and the psychological level of 4,000, held firm. This development led into the day’s economic events, including the release of the Consumer Confidence Report and the Federal Reserve’s (Fed) Governor Barr’s testimony to the Senate on banks at 10 a.m. Eastern. Nevertheless, there was no significant market reaction to these events.

Throughout the day, the market continued to exert pressure on this support zone, with each bounce off the 21-day EMA being minimal. The market developments of the day have piqued the interest of traders, who are closely monitoring for any potential shifts in trend or sentiment.

Critical Rotation Takes Place

Throughout a period of stagnation in the S&P 500 futures, the Nasdaq and Dow underwent sector rotation. In previous sessions, the Nasdaq had been the weaker index, while the Dow Jones had kept the market afloat. In a divergence of indices like this, the market tends to move higher when big technology companies lead it. However, around the midpoint of today’s session, rotation occurred again, with the Dow Jones weakening and the Nasdaq strengthening.

During this rotation, the S&P 500 futures fell below the support zone that had been in play throughout the week. Nevertheless, by the end of the trading session, it had returned above and reclaimed the support zone. It is common to observe such rotations at the end of a quarter. Big institutions and funds on Wall Street must position themselves for the quarter’s end and the upcoming one. Rotation can cause volatility, and where the money flows may indicate where the market is heading.

Events for Tomorrow

Tomorrow there are only two events on the economic calendar, which happen at 10 a.m. Eastern. Pending U.S. Home Sales will be released, and then Fed Gov. Barr will move his testimony on the banks to the House. 

Importance of Ranges

As we approach the end of this quarter, it is advisable for retail traders to use the roadmap to guide their market sentiment to avoid trouble. When the S&P 500 futures trade between 3,993 and 4,033, we can expect choppy, non-directional activity with high volatility. However, if either of these levels breaks, a direction may become apparent, and there are multiple targets in each direction if the zone breaks.

On the upside, we have a mini psychological level of 3,500, the previous week’s high of 4,073.75, and a key psychological level of 4,1000. Conversely, on the downside, we now have the low created today at 3,980.75, a 15-day Simple Moving Average (SMA) at 3,968, and a mini psychological level of 3,950. By carefully monitoring these levels and anticipating any potential breaks, traders can make informed decisions and navigate the market with confidence.

Markets Make No Advancement

The Nasdaq and the S&P 500 were Negative to close the session. The S&P 500 futures closed down 0.07%, declining 3 points, while the Nasdaq futures closed down 0.37%, losing 47 points. The Dow Jones futures followed, closing down 0.06%, a loss of 18 points.