Analyzing the S&P 500 futures contract (ES) with technical indicators can be useful for discovering potential trade opportunities by measuring price action, volume and volatility. Insights gained from technical analysis can serve as signals for potential reversals or subsequent market moves.
The following are 3 technical indicators frequently used when analyzing futures markets:
- Bollinger Bands®
- Exponential Moving Averages (EMA)
Consisting of three lines that make up a band, Bollinger Bands® measure volatility based on the price action of a futures contract. Tightening and widening of the upper and lower bands can be used to indicate potential market moves.
The following chart featuring the daily S&P 500 futures contract (ES) from October – August of 2017 is an example of Bollinger Bands® expanding and contracting ahead of moves within the market:
Exponential Moving Average
An Exponential Moving Average (EMA) is used to identify trend direction and potential buy/sell signals. The 50-day EMA crossing over the 100-day EMA is a common indication a potential bullish trend, while the 100-day EMA crossing over the 50-day EMA is often an indication of a potential bearish trend.
The chart below of the S&P 500 futures contract (ES) during October – August of 2017 is an example of using the Exponential Moving Average (EMA) to spot a new market trend:
Moving Average Convergence Divergence (MACD) is a technical trading indicator used to analyze market changes over time. The MACD relies on three EMA’s (12, 26 & 9-day periods) to both measure price momentum and act as a potential buy/sell signal.
The chart below of the S&P 500 futures contract (ES) during October – August of 2017 is an example of using the MACD indicator to spot market changes:
As always, remember past performance is not indicative of future results and you should always trade within your risk tolerance levels.