Initiate short positions below the 26,000-pt level. The E-mini Dow formed a “Long Black Day” candle last night – an indication of strong selling activity. It tumbled 962 pts to close at 25,519 pts, off the session’s high of 26,522 pts. As the index has breached below the 21-day SMA line and wiped out nearly the previous two months’ gains, this indicates that market sentiment is turning negative. This may also further extend the downside swing that started from 3 Oct’s historical high. Meanwhile, yesterday’s closing also triggered our previous trailing-stop recommendation at the 26,226-pt threshold – which has captured part of the profit. Note that we initially advised traders to initiate long above the 24,600-pt level on 11 Jul.

As seen in the chart, the near-term resistance level is seen at the 26,000-pt psychological spot. This is followed by 26,522 pts, situated at the high of 10 Oct’s “Long Black Day” candle. Towards the downside, the immediate support level is seen at 24,955 pts, determined from the previous low of 15 Aug. The next support is anticipated at 24,611 pts, which was the low of 11 Jul.

Hence, we advise traders to initiate fresh short positions below the 26,000-pt level. A stop-loss can be set above the 26,522-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 11 Oct 2018