Market Analysis (08 July’21)

The S&P500 futures chart holds the keys to what should happen next. There are several key pivots on the ES hourly chart and depending where the index closes this week, we might see two radically different scenarios going forward.

Below is the hourly ES chart. The futures formed a Bull Trap pattern yesterday and the index dropped sharply over night falling below 4305 support level (prior higher low). After the market opened, the index bounced for an hour and then staged an intraday rally forming a potential Bear Trap pattern.

The big question now is what happens next. Depending when the index closes tomorrow, which is Friday and end of the week, two radically different scenarios could be expected going forward.

Bullish Scenario

ES holds over 4305 level and closes above 4322 tomorrow. This means that today’s Bear Trap pattern holds, which will entice more dip buyers to start chasing the index. Should this scenario unfold, the index will most likely challenge the prior all time highs early next week.

ES, 1h

Bearish Scenario

ES drops below 4305 and closes below 4300 tomorrow. This means that today’s Bear Trap pattern doesn’t hold and today’s dip buyers might be forced to sell. Should this scenario unfold, the index will most likely drop below today’s low early next week.

ES, 1h

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