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TRADERS CHECK THEIR CHARTS AS THEY BRACE FOR ANOTHER MONDAY MORNING ROUT
For the second week in a row, U.S. equity index futures are tumbling on a Monday morning.
Last week, DeepSeek fears kicked off the trading week. This week, it's fears of a full-blown trade war and its impact on the global economy after President Donald Trump levied steep tariffs on Mexico, Canada and China.
Indeed, ahead of this Monday's open, e-mini Nasdaq 100 futures NQcv1 are collapsing about 2%. E-mini S&P 500 futures EScv1 are down more than 1.5%.
Traders who utilize time-based methodologies were already on alert for increased volatility, given that last week marked a milestone utilizing a projection from the S&P 500 index's .SPX 2022 bear-market low.
The S&P 500's 6,118.71 record closing high and its 6,128.18 record intraday high occurred in the week just prior to the time projection.
Additionally, over the past two weeks, the SPX has once again been repulsed by a long-term resistance line:
In early December, with this line from the 1929 high acting as a hurdle around 6,100, the S&P 500 hit 6,099.97. The benchmark index then sold off as much as 5.4% into its mid-January low.
This line was around 6,125 in January, and the SPX ended the month at 6,040.53.
Now with e-mini S&P 500 futures suggesting about a 100 point SPX plunge at the open, the benchmark index should fall below its rising 50-day moving average, which should be around 5,990.
Of note, amid last Monday's panic, the SPX hit its low for the week just shortly after the open.
Thus, traders will be watching to see whether the support line from the October 2023 low and rising 100-DMA, which should be in the 5,900-5,885 area on Monday, provide a floor. This support line and the 100-DMA contained mid-January weakness on a daily closing basis.
A decline to the 5,900-5,885 area would put the S&P 500 index down around 3.7%-4% from its record intraday high. The Jan. 15 gap requires a fall to 5,871.92 for a fill, which would put the index down 4.2% from its record intraday high.
The Jan. 13 intraday low was at 5,773.31, which is 5.8% below the record intraday high.
The rising 200-DMA, should be around 5,630 on Monday. The last close below the 200-DMA was on Nov. 1, 2023. A quick decline to test this long-term moving average would put the SPX down around 8% from its record intraday high.
On strength back above the 50-DMA, the 6,100-6,128 area will be a tough hurdle, and the resistance line should ascend to around 6,150 this month.
(Terence Gabriel)
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