Stay short. The downward momentum in the E-mini Dow continued as expected. A black candle was formed yesterday, which pointed towards a continuation of the downside move. It dropped 252 pts to close at 24,417 pts, off the session’s high of 24,705 pts and low of 24,342 pts. On a technical basis, investor sentiment remains negative in the near term, as the E-mini Dow erased most of the previous day’s gains and marked a lower close below the 21-day SMA line. Overall, we expect the market to decline further if the immediate 24,227-pt support is taken out decisively in the coming sessions.

Currently, we anticipate the immediate resistance at 25,080 pts, ie the recent high of 21 May. If a breakout occurs, the next resistance is maintained at 25,813 pts, which was the previous high of 27 Feb. Towards the downside, the immediate support is now seen at 24,227 pts, defined from the low of 29 May. The next support would likely be at 23,467 pts, obtained from the previous low of 3 May.

Hence, we advise traders to maintain short positions, given that we initially recommended initiating short below the 24,600-pt level on 30 May. A stop-loss can be set above the 25,080-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 1 Jun 2018