Institutional Players Are Back-U.S. Indices Trend South

It has been a rough open on Wall Street with the DJIA and S&P 500 both heavily in the red. Holiday weekends pose many challenges as an extended market close can bring many external factors into asset valuations. An active news cycle can create chaos for investors as markets are closed — fresh turmoil from Italy has done just that for the U.S. indices.

This extended U.S. holiday weekend featured a revival of concerns from the Eurozone. Turmoil over the potential of a fresh Italian election in September has whacked global equities. As a result, the U.S. open has been definitively negative.

Let’s dig into the S&P 500 technicals and see if we can identify where the downtrend might stop.

E-mini S&P 500 Technicals

The daily chart for June E-mini S&P 500 futures is an ugly sight for bulls, with prices falling more than 60 ticks on paranoia out of the Eurozone.

The selloff is poised to bring several technical levels into play. Here are the areas of support worth watching as the trading day progresses:

• Support(1): Bollinger MP, 2702.50
• Support(2): 38% Retracement of Current Wave, 2684.25
• Support(3): Daily SMA, 2682.75

Bottom Line: With institutional money involved in today’s trade, the downtrend in U.S. equities has been magnified. However, there is a robust area of support from 2684.25 to 2682.75. For the remainder of the session, buys from 2685.25 lend solid entry to the bull. Using an initial stop at 2681.75, this trade yields 14 ticks on a 1:1 risk vs reward management plan.

As always, keep an eye on leverage and trade smart!