S&P 500 futures are showing a bearish trend, here's what chart analysts are saying about it

Published Thu, Apr 11 202412:38 PM EDTUpdated Thu, Apr 11 20241:53 PM EDT

The e-mini futures contracts tied to the S & P 500 just posted their third negative "outside day" in the past eight sessions. Outside days happen when the range of a security's price sees higher highs and lower lows than it did the day before. To be a negative outside day, it should — compared with the previous session — open higher, trade to a new high, reverse and trade to a lower low and close below the prior low (or at least below the prior open). The previous day's trading period should be smaller in range and should have closed higher. Chart analysts use these events to gauge market sentiment and potential trend reversals. In this case, it's a downward shift. On Wednesday, the e-mini closed at 5,207.75 — below the previous day's low of 5,260.25. It also posted negative outside days on April 1 and April 4. On Thursday, the futures were trading near their support level, according to Tom Fitzpatrick of R.J. O'Brien. He said 5,191.50 to 5,193 is the level to test, with the next key level down being 5,098, the e-mini's 55-day moving average. Chart analysts, however, are shrugging off the recent trio of outside down days, saying they don't threaten the longer-term up trend. "These exhaustion signals are developing against a bullish longer-term trend, meaning they aren't overly convincing in our work," said Ari Wald, an analyst at Oppenheimer. "That is, we think the market should continue to push higher through the balance of the year." Will Tamplin, an analyst with Fairlead Strategies, said the outside down day would need to follow a strong up move to cause concern. "Since the SPX has been consolidating over the past few days, the outside-down-day becomes less meaningful," he said. Last week, the e-mini posted a bearish outside week for the first time since January 2022 as rising Treasury yields weighed on the stock market. E-mini futures are electronically traded, cash-settled and represent a fractional portion of a stock index. —CNBC's Nick Wells contributed reporting