Today we roll the stock index futures contracts to the new September front month. It’s time to examine how this shifts our daily targets based on the pivots established by the new contract. Some people will use a continuous contract in order to run Fibonacci analysis without the need to roll to the new month, since the new front month contracts require that the analysis is started from scratch. But using a continuous chart, where the data feed automatically rolls to the new contract and simply appends the data to the last contract information introduces a large margin of error and makes the calculations much less precise.

For longer term views, such as on a weekly chart, it’s far better to look at the cash index underlying the futures contract. Since this doesn’t rollover, we can maintain the same pivots and project accurate targets across the rollover dates. Here’s a look at the S&P cash index weekly:

Click on image to enlarge!

Prior support breaks put the emphasis on the initial weekly downside target at 996.82. While we may see a continued decline beyond that point, the downside pattern is not complete until we see that level. It’s highly probable that any attempt at a rally before then will fail at intervening resistance. For that resistance we can look at a daily cash chart, but since the focus of this report is on the futures we’ll switch to an ES (eMini S&P futures contract – CME) daily chart:

Click on image to enlarge!

The most recent swing high on this chart, established on June 3rd, held at the .382 retracement of the major high to the current daily low. This is the level that we’d expect to see hold if there’s still a great deal of interest in maintaining the downtrend. There was also a Fibonacci Timing factor at that high; the prior rally lasted 5 bars, and the failure against the .382 resistance was 6 trading days from the current daily low. We allow a +/- 1 day factor in calculating this sort of timing, and indeed that high was established at the start of the session on June 3rd. Essentially it was an overnight high put in between 5 and 6 days from the daily low, matching the bar count in the prior rally. This reinforces the resistance factor. Targets can be seen to downside, with the target in bold essentially matching the current weekly cash target, as adjusted for the September futures contract.

For more from Mark including his “Chart of the Day”, visit MJBraun.net.