The S&P 500 has rallied back to the edge of rejection after a strong 5-day reversal from 1803. Will the market continue to see rejection above 1868, or will we finally see 1900? 1876 will be the key.
1876 Delivers
In the April 1st edition of the Opening Print (S&P 500 Due For Breakout in April) I wrote: “If price cannot establish acceptance above 1876 soon, a rejection of current value at 1865.25 would suggest a price discovery phase into prior lower value at 1828.50, with a shot to reach lower price levels at 1800 (LVN), 1775 (CVPOC), and critical support at 1725 (LVN). If you’re a bear, you want sellers to continue to keep a lid on 1866 to 1876, and you want price to eventually run through LVN support at 1824.”
I never cease to be amazed at how price responds to key levels in the market time and again. The E-Mini S&P 500 futures [CME: ESM14] pushed beyond our 1876 key level in the first week of April, but price was unable to gain acceptance above this level, which led to a selloff into support at 1830. Responsive sellers kept a lid on 1866 after the bounce from 1830, which triggered another move lower into the 1800 LVN. Price has since rallied from the 1803.25 low, coming within 1 tick of 1866 heading into Tuesday’s session. Not bad for a 5-day bounce.
Now that the ES has rallied back to the edge of rejection, which spans from 1866 to1868, what’s price likely to do next? Here are my thoughts…
1876 Remains the Pivot to Watch
The ES has rallied over 60 points since last week’s 1803.25 low, and has already returned to the 1865.25 MCHVN, which had been the micro composite VPOC to begin the month. MCVPOC has since shifted lower to 1843.25, which will likely be the first level of interest should price see rejection between 1866 and 1868. As a matter of fact, if price fails to gain acceptance above 1868, look for price to go offered through 1865.25 with downside targets at 1843.25 (MCVPOC), 1828.50 (CVPOC), and 1800 (LVN). The biggest LVN on the board remains 1800, so look for responsive buyers to become active if this level is seen.
The composite volume profile shows volume significantly drops off above 1868, meaning the market has yet to create meaningful acceptance above this zone. While interest drops off above 1868 as a whole, the real pivot remains the 1876 LVN, which could offer a first touch fade opportunity.
Otherwise, if the ES can gain acceptance above 1876, we could finally see a real push into 1900, and perhaps well beyond judging by the amount of sellers that have positioned themselves above 1866. If these sellers do not get paid, they will be forced to buy to cover their positions, which could spark a short covering rally into the primary and secondary upside weekly targets at 1887.75 and 1898.25, respectively, while remaining on course to reach the ABCD measured move target at 1937.75.