Markets

Playing triangle in S&P 500 futures

Stock futures have formed a triangle since dropping last month, providing opportunities for both the bulls and the bears.

ESU5 (Sept '15) S&P 500 e-mini contracts have made higher lows and lower highs since bottoming at 1831 on Aug. 24 and are now testing the top of that range. The hourly chart below demonstrates those price swings, and the index was trying to break free at the time the image was captured.

(Charts courtesy of optionsHOUSE )

Each point represents $50, so an investor who bought a single contract at the low and sold at the current level around 1963 would have made $6,600. Margin rules required they had at least $5,060 in their account, so that would represent a return of more than 100 percent on their capital. Bears could have made about $4,000 between Aug. 27 and Sept. 1. Both buyers and sellers also had the benefit of being able to trade virtually around the clock, including Labor Day.

Today's bounce comes as the S&P 500 stabilizes above its highs from last October. The index's 10-day moving average is turning higher as well, a potential indication that short-term momentum is turning bullish. (See the daily chart below.)

Headlines have been mixed overall, with last week's jobs numbers missing estimates but economic growth revised up in Europe and the U.S. The big questions now are whether the worst of China's recent panic selling has abated and whether the Federal Reserve will raise interest rates on Sept. 17.

For more information on futures, please visit The Futures Institute (Powered by CME).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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