Maintain long positions with a cautious stance. The E-Mini Dow reacted positively after testing the prior session’s low of 29,848 pts – with a 29,840-pt low – before rebounding to end the day 338 pts stronger at 30,203 pts. The positive reaction from the 29,848-pt level continues to signify its importance in defining the index’s next directional bias. Specifically, should this level be breached at the close during the coming sessions, this implies the E-mini Dow’s multi-month upward move may have reached an interim top, opening the door for a correction phase setting in. Our bias is based on the observation that the index’s recent 5-week upward move has shown signs of losing momentum – a typical precursor for market top-building processes. For now, we keep to our positive trading bias.

For now, we recommend traders stay in long positions. We initiated these at 30,033 pts, or the closing level of 11 Dec. For risk-management purposes, a stop-loss can now be placed below the 29,848-pt mark.

The immediate support target is revised to 29,848 pts and followed by 30 Nov’s low of 29,428 pts. Conversely, the immediate resistance is set at 30,309 pts – 9 Dec’s high – and followed by 30,500 pts.

Source: RHB Securities Research - 16 Dec 2020