A Reversal In The S&P?

Key support in the S&P E-minis looks like it will be tested once again this year. We have looked at this chart a number of times and highlighted the importance of the 50-day EMA as a key trend support and a parameter against which market sentiment can be assessed.

The key points to note are:

• The 50-day EMA has proved to be a reliable trend indicator and continues to successfully identify where demand interest in this contract lies, once a corrective cycle unfolds.
• This year, the 50-day EMA has provided support on a number of occasions; in early February, early March, March 25, twice in mid-May and most recently on June 18, 21 and Jul 19.
• The slope of the EMA is positive. This is an important condition as it reflects and reinforces a bullish trend condition.
• Furthermore, the set-up between the 20- and 50-day EMAs is bullish and while this holds, it suggests that the uptrend is likely to extend.

What is likely to be important near-term?

• The EMA intersects at 4341.36 today. The average as highlighted above is a support parameter and it will be interesting to see whether it holds.
• A break is not necessarily bearish as the chart clearly displays. What will be key is the extent of any break and whether price remains below the EMA.
• Furthermore, a change in the slope of the average would reflect a possible trend reversal and further out, a bearish cross (20-day EMA crossing below the 50-day EMA) would reinforce a developing bearish cycle.
• These shifts would suggest market sentiment has changed, from bullish to bearish.

At this stage however, the pullback this week appears corrective. Watch the 50-day EMA though!