If ever evidence were needed that equity markets have been over extended and struggling to break higher we need look no further than the YM mini dow jones futures daily chart for March. The contract reflects the cash market which has been trading in an extremely tight range for the whole of February as it attempts to break the 14000 barrier as denoted by the dotted yellow line.
Yesterday’s move lower was one of the stronger sessions this month, primarily as a result of the release of the FOMC minutes which the market has interpreted as more hawkish than expected. As a result markets sold off on this news with the e-mini closing lower at 13883 and posting a bearish engulfing candle as a result.
Despite ending the session lower the index had peered over the 14000 price point once again, achieving 14035. With the congestion zone now clearly evident on the daily chart and with the floor in place at 13800 we now have to wait for a breach of this region.
Moving to the indicators, the daily heat map remains bullish and with both the trend and volumes also bullish the outlook still remains positive for equities. However, any break below 13800 will be the trigger for a sharp sell off and a pullback to 13450.
By Anna Coulling
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