Emini breakout below May, trend channel line overshoot

Market Overview: S&P 500 Emini Futures

The S&P 500 Emini futures gapped down and broke below the May low. Bears want a continuation to measured moves below around 3600 and 3450. While the bulls have a trend channel line overshoot, they need at least a micro double bottom or a strong bull reversal bar before they would be willing to buy aggressively.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

• This week’s Emini candlestick was a bear bar with a prominent tail below. It gapped down on Monday and closed below May low.
• Last week, we said that odds slightly favor at least slightly lower prices, and the bears want another bear bar which will increase the odds of a breakout attempt below the May low, while bulls want a bull reversal bar even though the Emini may trade lower first.
• The gap this week remained open which was a sign of strength from the bears. 
• The bulls want a failed breakout below the May low.
• They see a trend channel line overshoot, and a wedge bottom (Feb 24, May 20 and June 17).
• However, since this week’s candlestick had a big bear body, it is not a good buy signal bar for next week.
• Bears want a continuation of the measured move down to 3600 or lower around 3450, based on the height of the 12-month trading range starting from May 2021.
• This week’s candlestick was a bear bar closing in the lower half of the range. It is a sell signal bar for next week.
• There was only 1 bull bar in the last 11 weeks. That means persistent selling.
• With the last 2 candlesticks closing near the low, odds continue to favor slightly lower prices.
• However, the trend channel line overshoot increases the odds of a 2-legged sideways to up pullback beginning within 1 to 3 weeks.
• The bulls will need at least a micro double bottom or a strong reversal bar before they would be willing to buy aggressively.
• For now, odds slightly favor sideways to down for next week.
• Bears want another bear bar closing near the low. Bulls on the other hand want next week to close near the high as a bull reversal bar with a long tail below even though the Emini may trade slightly lower first.

The Daily S&P 500 Emini chart

• The Emini gapped down on Monday and traded sideways for several days. Wednesday traded slightly higher but failed to close the gap.
• Thursday gapped down once again but closed with a prominent tail below. Friday was a bull doji overlapping Thursday’s range.
• Last week, we said that the bears will need to create consecutive bear bars closing near the low to increase the odds of a breakout below the May low.
• If the Emini stalls around the May low and the bulls get a strong bull reversal bar or a micro double bottom, we may see bulls return for a double bottom major trend reversal higher.
• The bears got the breakout below May low this week with follow-through selling.
• Bears want a continuation of the measured move down to around 3600 based on the height of the 9-month trading range or lower around 3450 based on the height of the 12-month trading range starting with May 2021.
• The bulls want a failed breakout below the May low. They will need to start creating consecutive bull bars closing near their highs to convince traders that a reversal higher may be underway.
• The bulls want a reversal higher from a trend channel line overshoot and a wedge bottom (Feb 24, May 20 and June 17).
• While there is a micro double bottom on Jun 16 and Jun 17, those are likely just sideways consolidation bars.
• Since Friday was only a bull doji, it is a weak buy signal bar for Tuesday.
• The problem with the bull’s case is that the move down since June 9 is in a tight channel. It increases the odds that the bears will get at least a small second leg sideways to down after a slightly larger pullback.
• The bulls will need to create a strong reversal bar following the trend channel line overshoot or a more credible micro double bottom.
• For now, odds slightly favor sideways to down and at least a small second leg sideways to down after a slightly larger pullback.
• However, because the selling is climactic with a trend channel line overshoot, traders should be prepared for at least a small 2-legged sideways to up pullback to begin within 1-3 weeks.

Trading room

Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. Al talks about the detailed Emini price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.

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