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Focus on S&P 500 and DJIA ahead of the US nonfarm payrolls

Jason Sen

The E-mini S&P 500 has made a full recovery from the sell-off and volatility at the start of the year as we beat the previous all-time high set in January at 2878. The monthly chart below shows the dramatic nine-and-a-half-year recovery from the low of the global financial crisis in 2009 at 665.75 to the new all-time high this week at 2944.75. A record-busting rise of 342%.

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For trade ideas we look a little more short-term at the daily chart below. The small but negative double-top, left with yesterday’s peak at 2944.75, could trigger a little profit-taking into the US nonfarm payrolls tomorrow as traders square up their short-term positions.

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Note how the slow stochastic at the bottom of the chart is already negatively diverging to ease overbought conditions.

The index is testing the two-month upward-sloping trendline at 2917/16 as you can see. There has never been a shortage of buyers on any weakness in the index for over nine years and this is unlikely to change in the near future.

However, if we continue lower the index should test much less important support at 2909/07. We know this 23.6% Fibonacci support level worked well last week as you can see in the daily chart below. But a break lower is more likely this week targeting 2902/00, 2896 and perhaps as far as 2892/90. On further losses look for an excellent buying opportunity at 2886/85.

This is where the price meets a longer-term 23.6% Fibonacci support level, coupled with the 55-day moving average and probably, by the time we get there, the rising five-month trendline starting from the low at the beginning of May. If we were to fall this far it would act as an excellent buying opportunity in the bull trend.

Holding first support at 2917/15 allows a recovery to first resistance at 2926/28. A break above 2930 targets minor resistance at 2935/36 before a re-test of the double-top at the all-time high. On a break above 2948/49 look for 2956/58.

The E-mini Dow Jones weekly chart below is obviously very similar the E-mini S&P! This week we beat the previous all-time high set in January at 26684 to reach 26966, just shy of the big round number of 27000. Markets do love a big round number.

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After the E-mini Dow Jones stalled just below 27000 the index collapsed to 14 ticks above support at 26760/750. So this is clearly the level to watch today. A move below 26730 risks a slide to better support at 26670/650 where it could be worth trying long positions with stops below 26600.

On a break lower, however, the next target and support should be found at 26550/540. In a bull market it is a low-risk idea to buy when the price hits a good support level, so again we could try long positions here, expecting buyers to pile back into the market. However, as always, traders must use stops to protect profits. In this case I would suggest placing stops just below 26500.

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Holding support at 26760/750 allows a recovery to minor resistance at 26820/840 today. Further gains in the bull trend should target 26880/890. A move above 26900 re-tests the new all-time high at 26966 before the big 27000 level. Above here look for 27075.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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