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

E-mini S&P 500 Futures (ES): Prices plunge due to Rate Increases

  • A look at the downward trend channel on the daily chart
  • ES drops 2.7% in 1 hour after the Feds interest rate decision
  • Vix reading is at 28 and sits within a range


In last week’s analysis of the ES Futures, we noted a possible bearish target of $3,750, which has been met. ES has fallen 4.8% since that article was written, and due to the comments of the federal reserve in yesterday’s press conference, the market may need to price in a possible 75 and 50 basis point hike until the end of next year.

Downward Channel On The Daily Timeframe.

The down channel has been steadily making lower lows, and the price eventually broke below it in mid-June. The sentiment has been very bearish this year, and traders taking short positions on the daily time frame after pullbacks have surely been rewarded.

As the ES tests the low side of the channel, we can expect a substantial amount of support at that level. If prices somehow bounce, the first target would be at $3,920, within the pocket of resistance that was previously a support level and is also the midline of the downward trend channel.

The year’s low is getting closer, with ES only needing a 4.6% drop to reach there. We cannot know if that will happen, but we must think in probabilities as traders. If the market does not hold this lower line of the trend channel, then a swift move down to $3,637.75 is likely.

ES Daily Chart With Downtrend Channel

The Vix

The Vix has been trading between 19.10 and 29.6 since the start of the year. It’s easy to notice the Vix bounces between these levels, and once they are trading toward the upper zone, we see heightened market volatility, indicating a downtrend.

The stochastic indicator shows overbought on the Vix currently, which would usually be viewed as a bearish signal when applied to the Vi. Still, because of the Feds’ comments yesterday and the issue that continues to rage in Russia and Ukraine, we cannot look at much in a bullish light, for the medium to long term, at least.


Swing Trading and Day Trading

Volatile times mean swing traders and day traders can be very profitable. The bearish long-term picture does not mean traders cannot take advantage of long trades using shorter time frames, as long as good risk management and an objective view of the markets are applied. Take a look at the video we made earlier on in the year if you would like to learn how to be more objective in trading.