Futures Trading January to February – Where are we headed?

The S&P500 emini futures have been very volatile this month coming out of multiple international crisis level events.

The S&P500 is presently in a chop zone that is roughly 120 points in consolidation on the daily chart.  The support came in at 1965 and has moved back and forth between there and the swing high.  I have placed a fibonacci extension over the previous correction to the swing high to show possible price extensions.  You might note the area from 2060 and the swing high to 2090 is where the market could consolidate and then spring board for the next targets around 2120, 2159 and 2220.

Futures trading January 2015 could see more quick short lived corrections than 2014.

You can probably see again how corrections are taking 4 to 7 days to move down and then 2-3 days to move up when it breaks out of consolidation.  Presently,  if price falls from this level, we could see a bit longer move down as we are in a Head and Shoulders Bearish pattern.  Note that Head and Shoulders Bear patterns have not taken a full extension down for the past few years and that I would expect to see them quickly reverse.

Central Banks are moving the markets and creating a very volatile intra-day trading situation.  Futures trading is an overnight market so Central Banks policy, intervention through Quantitative Easing and use of interest manipulation will first show up in the futures market.  Be aware that some of these swings have been 20 to 40 handles (points) in the after hours only to be followed by volatile gaps, and intraday reversals covering 20 to 40 points.

Trading Gaps in 2015.

I have highlighted the open gaps on the chart above, you will see them as small rectangles showing where the previous days close and the next days open have not filled.  Noting these as downside targets for sell offs. and of course the major psychological support of 1800.  If we break under here watch for the bid to be pulled and maybe some free fall.  Always remember that trading is risky, don’t trade unless you know what you are doing and have risk capital.  Don’t trade with your rent money, that is gambling!