Long S&P 500 setup as bulls absorb big selling volumes

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S&P 500 E-minis have absorbed plenty of selling over the past few sessions but are yet to take the lows struck on Monday. While that doesn’t mean they won’t, it looks like futures may be settling into a new sideways range between 5350 on the topside and 5154 on the downside. Granted, the latter is only a minor level that was breached in the peak of the market puke on Monday, but the dip was bought aggressively below the level.

While signals on momentum like RSI (14) and MACD point to continued downside risks, sitting near the bottom of the newly established range, a long setup could be on the cards if we see risk-reward of the trade improve. It’s not a high probability setup, so if we’re going to go against the trend, we don’t want to be risking a lot.

Pullbacks towards 5154 offer one entry point, allowing for a stop to be placed below Monday’s low for protection. The trade target would be the top of the range at 5350. Those wishing to get in now could do so with a stop below 5154 for protection. Target would be the same as the preferred setup.

From a fundamental perspective, Thursday’s US jobless claims data may be influential on the trade with a stronger-than-expected outcome likely to ease concerns about the US economic trajectory, and potentially the outlook for corporate earnings.

DS