E-mini S&P 500 (ES) futures

E-mini S&P 500 (ES) Futures Expecting Bearish Continuation

  • The S&P 500 is expected to lose more ground.
  • The Fed’s aggressive approach is pushing the index lower.
  • To keep inflation under control, Biden intends to eliminate Trump’s tariffs.

The E-mini S&P 500 (ES) futures price has been moving lower for the past seven weeks. Such a move was last seen in 2001 during the dot-com crash. If the US economy falls into a recession, then stocks will be in a bad position going forward. 

Morgan Stanley economists are expecting the S&P 500’s price-earnings multiple to fall. “While our 12-month target for the index is 3900, we expect an overshoot to the downside this summer that could come sooner rather than later. We think 3400 is a level that more accurately reflects the earnings risk in front of us, and we expect that level to be achieved by the end of the second-quarter earnings season, if not sooner.”

The Fed’s tightening of monetary policy and its aggressive approach to rate hikes are making it harder for businesses to recover after the pandemic. Since the Fed has promised to keep raising interest rates to try and control inflation, the business climate in the US will suffer. 

With all this in mind, prices would only recover and strongly push back above 4000 if the US could avoid going into a recession. Investors will pay close attention to news about the US economy, such as sales of new homes. Fed Chair Powell is also expected to speak later in the day, and this could cause some movement in the index.

On Monday, the index went up because investors praised what Vice President Joe Biden said about tariffs. To lower inflation, Biden said in a statement that his administration was thinking of doing away with Trump’s tariffs that amounted to unnecessary taxes.

E-mini S&P 500 (ES) futures technical forecast: 

E-mini S&P 500 (ES) futures
E-mini S&P 500 (ES) futures

The 4-hour chart shows prices currently at the 4000.00 level. Prices have been trading below the 30-SMA, showing the trend is down. The RSI gives us a better look at the strength of the trend. The bullish divergence tells us that bears are losing steam either because they are resting or because they are too exhausted to take prices any lower. 

For a bullish market to return, we would have to see a break back above the supply zone ranging between 4101 and 4155. Moreover, the 30-SMA also stays within the demand zone, creating a strong confluence area.