June E-mini S&P 500 Index futures are edging lower shortly before the cash market opening on Monday. After posting a potentially bearish closing price reversal top at 6888.00 on Friday, the market confirmed the chart pattern Sunday evening with a gap lower opening through Friday’s low.
The index is also trading on the weak side of a 61.8% level at 6812.50, the 50-day moving average at 6807.68 and the 200-day moving average at 6794.69. These are early signs of selling pressure with the 50% level at 6725.00 the first major downside target.
Typically a closing price reversal top forms after a 7 to 10 day rally. The top at 6888.00 was by my definition a classic reversal with the market making a higher high, followed by a lower close, close below the day’s mid-point and opening. It’s not a change in trend but a strong sign that selling is greater than buying at current levels. Sometimes it forms to alleviate upside pressure. It also tends to lead to a 2 to 3 day 50% to 61.8% correction so don’t be surprised if we see a steep break to 6620.75 to 6557.50 later this week.
