September E-mini NASDAQ-100 Index futures closed higher on Friday, but the inside move suggests investor indecision and impending volatility. Gains were capped as fears over business disruptions due to another record-breaking rise in COVID-19 cases at home overtook optimism over a further stimulus package for a post-pandemic economic revival.
The NASDAQ also underperformed the S&P 500 for the sixth session in a row as investors rotated out of high-flying companies including Microsoft Corp and Apple Inc, which have powered the tech-heavy index to a record high last week.
On Friday, September E-mini NASDAQ-100 Index futures settled at 10622.50, up 110.75 or +1.04%.
Daily Swing Chart Technical Analysis
Main Trend Technical Analysis
The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on July 13 and its subsequent confirmation the next session.
A trade through 11058.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through the nearest main bottom at 9728.75.
Minor Trend Technical Analysis
The minor trend is down. This move confirmed the shift in momentum to down. A trade through the last minor bottom at 10358.75 will signal a resumption of the downtrend.
The minor trend will change to up on a move through the last minor top at 10766.50. This will shift momentum to the upside, but an even bigger shift will occur if buyers can overtake 11058.50.
Retracement Level Analysis
The minor range is 11058.50 to 10358.75. Its retracement zone at 10708.75 to 10791.25 is resistance. This zone stopped the buying at 10766.50 last week.
This chart pattern is very important because it could be indicating that a secondary lower top is forming. This is usually the first sign of fresh short-selling.
The first short-term range is 9728.75 to 11058.50. Its 50% level at 10393.50 essentially stopped the selling last Tuesday when buyers came in at 10358.75.
The second short-term range is 9368.25 to 11058.50. If the selling pressure is strong enough to take out last week’s low at 10358.75 then look for an extension of the break into its retracement zone at 10213.25 to 10014.00.
The closing price reversal top is a major chart pattern. So far, all it is indicating is that the selling is greater than the buying at current price levels.
Usually this chart pattern leads to a 2 to 3 day correction or at least 50% of the last rally. We’ve already seen that with the pullback into the 50% level at 10393.50.
Look for the selling to resume if 10393.50 fails as support with 10213.25 to 10014.00 the next major downside target.
Our work suggests that trader reaction to 10708.75 to 10791.25 will set the tone of the market on Monday.