Last night, U.S. equity markets tanked as Donald Trump pulled off a historic upset to become the 45th President of the US. All the major indexes were under pressure and the E-mini futures on the S&P 500 index hit limit down rules after declining 5% in overnight hours. The rebound that persisted eventually recovered all of its losses as financial markets digested the news.
The prospects of further fiscal stimulus, tax cuts and a pro-business agenda have supported the tentative rebound, but could be short-lived as many potential policy changes regarding trade could provide strong risk-off catalysts. Volatility is likely to remain strong going into year end.
The S&P 500 index futures daily chart shows the recent rebound has price tentatively breaking out above the 100-day SMA. Price has not been above this level since end-September and if the bullish move continues, we could see a major run target the $2200 zone. It is around that area that price could form a double-top pattern. If valid, we see a pullback target the $2,050 level. If the pattern is invalidated, further upside may target the $2,235 to $2,275 area.
If price action is unable to maintain both the 50 and 100-day SMA range, we could see major support come from the psychological $2,080 region.
The trade: Sell E-mini SP500 at $2,195, with a stop loss at $2,215 and a take profit at $2,075. The risk/reward ratio is 1:3