September E-mini Stock Market Monthly Technical Analysis for August 2016

A combination of better-than-expected earnings and additional stimulus from the Bank of Japan and the Japanese government, helped drive U.S. stock indices higher in July. September E-mini S&P 500 Index futures closed July at 2168.25, up 48.00 or 3.73%. The September E-mini NASDAQ-100 Index futures contract finished at 4726.75, up 319.75 or 7.26%.

Additionally, the rally was helped by the Fed’s inability to provide clarity about the timing of its next rate hike and expectations of rate cuts in August from the Reserve Bank of Australia, the Bank of England and the Reserve Bank of New Zealand.

More liquidity means higher equity prices because investors simply have no other place to go to get a decent recent return than the stock market. This being said, we expect the stock market in August to continue to move higher as long as the central banks are willing to keep cutting rates and providing fresh investing capital.

TECHNICAL ANALYSIS

E-mini S&P 500

The main trend for the E-mini S&P 500 Index futures contract is up. Its new main bottom is 1981.50. A trade under this price will turn the main trend to down according to the monthly swing chart.

Based on the July close at 2168.25, the first upside objective is a steep uptrending angle at 2225.00. This is not actually resistance either, but crossing to the strong side of this angle will put the index in an every stronger position.

The nearest support angle comes in at 2171.50. This is followed closely by a second uptrending angle at 2161.00. A failure to hold this area as support will signal a major shift in investor sentiment.

E-mini NASDAQ-100 Index

The September E-mini NASDAQ-100 Index futures contract is also sporting an uptrend according to the monthly swing chart. Its main bottom is 4167.75. Barring any unforeseeable economic disaster in the world, the index should continue to grind higher in August, support by the promise of more liquidity from the central banks.

Based on the July close at 4726.75, the first upside target is 4731.50. The next two levels are layered at 4763.50 and 4827.50. The latter is the trigger point for an acceleration into 4955.50.

The inability to sustain a move over 4726.75 will signal the presence of sellers. This could drive the index back into support angles at 4690.00 and 4679.75. The latter is also a trigger point for a steep break into the next support angle at 4423.75.

CONCLUSION

The strong closes in July and the promise of fresh stimulus from several central banks in August should give the E-mini S&P 500 Index futures contract and the E-mini NASDAQ-100 Index futures contract a bullish bias in early August.

A second boost could come from the August 5 U.S. Non-Farm Payrolls report for July. Although a stronger-than-expected report will move the Fed closer to raising interest rates, it should not be enough to spook investors to bail out of stocks because the Reserve Bank of Australia, the Bank of England and the Reserve Bank of New Zealand are expected to cut rates.

I don’t think stock investors are going to panic if the Fed raises rates anyway in 2016 because it may be another year before they do it again.