Monthly S&P500 Emini futures candlestick chart: Candlestick pattern is a bull flag
The monthly S&P500 Emini futures candlestick chart is forming a bull flag at the moving average.
The monthly S&P500 Emini futures candlestick chart finally pulled back to the moving average after 38 months above it. The buyers at the moving average have been able to prevent further selling so far after last month’s huge selloff, but they might soon fail.
When a market is strong enough to stay above its moving average for 20 consecutive bars, the bulls are buying above an average price and are strong. Once they have stayed above for 30 – 40 bars, the rally becomes climactic. There have only been two other times in the past 50 years when the S&P500 cash index held above the moving average for 38 months or more. In 1998, it corrected 22%, and in 1987, it fell 36%. The Emini is still Always In Long, but the odds of a climactic reversal are about about 50%. A 36% correction is unlikely, but a test below the October low of last year would be a 16% correction, and that has about a 50% chance of happening.
A climactic reversal usually creates a selloff that is sideways to down, and lasting about 10 or more bars. This means that this pullback on the monthly chart might last a year or more. One downside target is last October’s low. Next is the bull trend line from the 2009 low, and then the March 2000 high of 1618.50. At the moment, these 2 lower targets are unlikely to be reached in the current leg down, but they are close enough to have about a 30% chance of being hit before the bull resumes up to a new all-time high.
Weekly S&P500 Emini futures candlestick chart: Traders learning how to trade the markets should be ready for a head and shoulders top
The weekly S&P500 Emini futures candlestick chart bounced off the low of 3 weeks ago. A lower high and 2nd leg down are more likely than a new all-time high.
Support levels for the S&P500 Emini futures candlestick chart. The October 2014 low would be a 16% correction. A 20% correction would be 1693.50. A measured move down if the Emini breaks below the double bottom would be 1526.50.
The weekly S&P500 Emini futures candlestick chart had a strong bear breakout below a 7 month trading range. The bulls have been able to form a double bottom with last October’s low, and a high low, but the selloff was strong enough so that there is about a 50% chance of another leg down that will test that low.
The reversal up was strong enough so that the bounce might last for several months. However, if it does last that long, the pullback from the bear breakout will probably create a lower high major trend reversal candlestick pattern. If one forms and there is a bear breakout below a good bear signal bar, there would be a 40% chance of a 2nd swing down, which could fall far below the October low.
It could easily fall for a measured move down based on the height of the pattern. Traders will look for a move down equal the height of the neckline of the double bottom (which is the all-time high) down to the double bottom. The range is about 300 points, and that means a 600 point correction from the high; that target is 1526.50. This would test the 2000 high and the monthly bull trend line. Although this is unlikely at the moment, traders should be open to all possibilities, and not be too quick to buy if the market begins to sell off again. Wait for a test of support.
Daily S&P500 Emini futures candlestick chart: The bear flag continues to add more bars
The daily S&P500 Emini futures candlestick chart is turned down today after a failed breakout above a double top bear flag. It is back in the middle of its 4 week trading range.
The daily S&P500 Emini futures candlestick chart has been sideways since last month’s collapse. That selloff was so unusually strong that it has a high probability (60%) of a 2nd leg down that falls for some kind of measured move. The two most common possibilities are a leg 1 = leg 2 measured move down from a lower high and a measured move based on the height of the bear breakout or the month long bear flag.
There is still a 40% chance that the correction is over and that the current rally will reach a new high. If there is a new high, there is at least a 50% chance that it will fail and form a large expanding triangle top (a type of higher high major trend reversal) and then another big reversal down. It will take at least a couple of years for last month’s selloff to fade in importance, and until then, it will continue to have a major influence on the price action.
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When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.
Hi Al,
Thoughts on crude oil? Daily chart: Thurs DT bear flag, Friday EB.
Weekly chart: Tight bear micro channel breaking out to a new low, breakout test, inside bar with a bear close then an outside bar closing as an ok reversal bar for the bears (despite the bull body).
What do you think the chances are we’re going back down to the low at 37.39 vs more sideways? Do you think the daily chart is in a TTR or a bear flag? I see it as a DT bear flag or low 4 short with Friday as the EB but I’m not sure I’m not just seeing what I want to!
Your question provides its own answer. Whenever traders begin to see reasonable arguments for both the bulls and the bears, they doubt that moves will go far. This means that bears do not want to sell low and the bulls do not want to buy high. Also, after the bears sell high, they will buy low to take profits. After the bulls buy bear breakouts, they will sell high to take profits. The result is that everyone is buying low, selling high, and refusing to hold onto positions, and this creates a trading range. The market probes to new highs, and then reverses down. It probes to new lows, and then reverses up. Eventually, a breakout will successful, but the odds are that 80% will fail.
No one is confident of anything other than a big move up or down is unlikely. Whenever there is a bounce up from a strong 2nd leg down in any market, traders know that the end of the selling has either happened or will happen with one more push down, which would create a wedge bottom. If the bottom is already in, a bear trend usually converts into a trading range, and not into a bull trend.
The best the bulls probably get over the next many months is rally to around the top of the last rally attempt, which ended in May at around 65. It might overshoot to 70 since trading ranges often go above resistance. If there is another leg down, it might overshoot the low of around 38. Will it get a 20 handle? It is possible, but I think that is irrelevant. What is important is that the market has had consecutive sell climaxes on the monthly chart, which is followed by a trading range in about 75% of occurrences. A minimum reasonable correction is TBTL, or Ten Bars, Two Legs, sideways to up. On a monthly chart, this means a trading range lasting a year or more.
You specifically asked about the daily chart, but the monthly chart is the biggest time frame with a clear pattern, and it is therefore more important. Everyone sees the strong reversal up. The odds are that it will have at least one more small leg up. There is maybe a 40% chance of a test of the May trading range. However, the leg down since July was strong enough to make traders unwilling to trust this rally unless it first reverses up from a test down and creates a major trend reversal. The current bounce is therefore a bull leg in a trading range, but the odds are better than 50% that it will attempt to form a major trend reversal on a test down. If there is a strong new low, it will probably form a wedge bottom on the weekly chart.
Thanks for taking the time to write that Al, that’s really helpful!