E-mini S&P 500 Index (ES) Futures Technical Analysis – Set Up for Steep Decline if 3878.25 Fails

March E-mini S&P 500 Index futures are trading lower shortly after the cash market opening as an unexpected rise in weekly jobless claims underscored a fragile labor market recovery. Meanwhile, Walmart Inc slid 5% after the world’s largest retailer missed quarterly profit estimates and predicted fiscal 2022 net sales to rise in low single digits.

At 15:00 GMT, March E-mini S&P 500 Index futures are at 3900.25, down 27.75 or -0.71%.

The Labor Department’s report showed initial claims for state unemployment benefits were 861,000 last week, compared with 848,000 in the prior week.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum shifted to the downside on Tuesday with the formation of a closing price reversal top.

A trade through 3959.25 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 3656.50. This is highly unlikely, but there is room for a sizable 50% correction.

The minor trend is down. It turned down on Thursday when sellers took out yesterday’s low at 3896.50. This confirms the shift in momentum. A trade through 3936.00 will change the minor trend back up. Another minor bottom comes in at 3878.25.

The minor range is 3878.25 to 3959.25. The index is currently trading on the weak side of its pivot at 3918.75.

The short-term range is 3656.50 to 3959.25. Its 50% level at 3807.75 is the first key downside target. This is followed by another 50% level at 3777.50.

Daily Swing Chart Technical Forecast

The direction of the March E-mini S&P 500 Index into the close is likely to be determined by trader reaction to 3918.75.

Bearish Scenario

A sustained move under 3918.75 will indicate the presence of sellers. The first target is the minor bottom at 3878.25. Taking out this level will reaffirm the shift in momentum. This is also a potential trigger point for an acceleration to the downside with 3807.75 the next major target price.

Bullish Scenario

A sustained move over 3918.75 will signal the return of buyers. If this can generate enough upside momentum then look for a re-test of 3959.25.

Side Notes

The daily chart indicates there is plenty of room to the downside under 3878.25. A combination of high selling volume along with sell stops could trigger a steep break into at least 3807.75 over the short-run.

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