No sign just yet of a major correction

Emini - YM September - daily chart
Emini – YM September – daily chart

With both summer and earning season now in full swing, it may be a good time to review the current state of the benchmark US indices, namely the ES, NQ & YM. For non futures traders these are the e-mini equivalents of the cash indices for the S&P500, the Nasdaq and the Dow Jones respectively.

Starting with the YM, what is particularly interesting and noteworthy is that in late June and early July it was the NQ that was leading, with the others following. In the past few days we have seen a complete shift and role reversal with the YM now leading whilst the NQ and S&P move into a phase of consolidation.

From a correlation perspective it is certainly true that the NQ & ES will tend to follow one another more closely given the broader basket of stocks which comprise these indices. The Dow, of course, is driven by only 30 stocks, many of which generate a substantial proportion of their revenue from overseas, and therefore like the FTSE100 in the UK, are much less a bellwether for the national economy and more reflective of global conditions.

From a technical perspective the YM has finally broken through the 17,000 price point on the daily chart, with yesterday’s price action closing well above at 17057 and building on the strong platform of support now in place at this psychological level. Volumes in yesterday’s session were at par and confirming the relatively narrow spread of the price action, suggesting further upside gains to come.

NQ Emini September - daily chart
NQ Emini September – daily chart

Moving to the NQ this has now moved into an extended phase of consolidation with the floor of price support now firmly in place at 3860 whilst the ceiling is being constantly tested at the 3930 price region. So far this month the NQ has been building a rising triangle with the classical flat top and higher lows to the underside, both suggesting a breakout in due course, and any move through 3950 will confirm that bullish sentiment is maintained.

Of the three major reversals in July each was fully supported by buying volume clearly evidenced by both the level of volume and also the depth of the lower wicks to the associated candles. This is simply evidence of the bulls coming in to support this price level.

ES Emini - September daily chart
ES Emini – September daily chart

Finally moving to the ES, the technical picture here is almost identical to the NQ with a consolidation phase now in progress and a resistance level in place at 1980. Again volumes under the down candles confirm strong buying and it is only a question of time before this index too joins the others in moving firmly higher and on to test the 2000 level in due course.

VIX_daily_chart_todayNo analysis of the indices would be complete without consideration of the VIX which despite the spike higher of 10th July which saw it briefly breach the 13 price point, the VIX is now firmly back into its downwards trend, and should the 10.20 be broken then single figures will not be far away.

Finally, the burning question as to when these leading indices start the long heralded correction, as always it will be price action and volume which will send the clearest signals. To date there is no evidence of either major distribution or a selling climax, the precursors to a major fall.

By Anna Coulling

About Anna 1012 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on No sign just yet of a major correction

    • Hi – I will do my best:-) – what we are looking for all the time is a selling climax which will then signal any longer term change in sentiment, and for investors it is really the longer term daily and weekly charts. All best wishes and many thanks for your kind comments – Anna

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