S&P 500: Consolidation Into Quadruple Witching

06/18/2020 6:00 am EST

Focus: STOCKS

Ricky Wen

ES Trade Alerts, Host

Technical outlook for the E-mini S&P 500 from Ricky Wen.

The E-mini S&P 500 (ES) gapped up to a high in the 3150s Tuesday morning and then quickly backfilled into the gap fill support of 3060s that eventually held, resulting in a standard rangebound day. Basically, price action just followed our four-hour yellow line projection as the market is deciding on a winner of this immediate range.

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The main takeaway is that the market is just stuck within an immediate range of around 100 points that is confined within an overall large range of 9.5%, or about 300 points (see chart). If you recall, 3231.25 and 2923.75 represent the temporary top and temp bottom, and it’s going to take some time to grind out a real winner in this massive range. Digestion is often needed as the market is trying to frustrate and trap both sides. Add in that the fact that this Friday is monthly OPEX and also quadruple witching that occurs every quarter.

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What’s next?

Daily closed at 3116 at on the ES as it remains stuck doing the good old "shakefest" by following the four-hour yellow line price projection. Expect more of the same for today, but in a contracted range due to the overnight clues and quadruple witching week tendencies.
Game plan:

  • As we head into Friday, monthly OPEX, there is no clear established trend right now as the overall range remains the 9.5% width between 3231.25 and 2923.75, the former representing the temporary top and the latter representing the temporary bottom
  • For now, the market remains stuck following our four-hour yellow line projection that anticipated the whipsaw/consolidation parameters given our expectations drawn on the range of 3160s-3070s.
  • For reference, the contracted overnight range is 3147-3096.5, so price action is stuck in a triangle within a rectangle range…meaning more market participants will be trapped.
  • Zooming in, the 78.6% fib retracement resistance of around 3165 derived from the temporary high to temporary low (3231.25-2923.75) remains adequate as the market is still battling in the overall 9.5% massive range (see chart below).
  • Traders must switch to an inside day strategy in order to look for quick scalps on the applicable range high/low setups or remain in cash when the odds do not favor them.

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Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

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