Emini Wedge

Market Overview: S&P 500 Emini Futures

The weekly chart formed the third leg down, an Emini Wedge. The market also broke below the trend channel line. The bulls want a reversal up from a wedge bull flag. However, they will need a strong reversal bar or a micro double bottom before they would be willing to buy aggressively. The bears want a test of the 200-day moving average.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

• This week’s Emini candlestick was a consecutive bear bar closing near its low.
• Last week, we said that the odds slightly favor the market to trade at least a little lower and for the third leg down forming the wedge pattern. Traders will see if the bears can get a strong bear bar trading far below the October 3 low, or will the market trades slightly lower, but closes with a long tail or a bull body.
• This week, the bears got follow-through selling closing far from the October 3 low.
• They got another leg down forming the wedge pattern (Aug 18, Oct 3, and Oct 27). 
• They want a strong breakout below the bull trend line with follow-through selling.
• If they continue to get a couple of consecutive bear bars closing near their lows, it will increase the odds of the reversal down from a lower high major trend reversal becoming successful.
• The next target for the bears is the 200-week moving average. It is close enough to be tested soon.
• The sell-off in 2022 ended after a test of the 200-week moving average.
• The bulls see the move down (from July 27) as a deep pullback of the move whole move up which started in October 2022.
• They want a reversal from a wedge bull flag (Aug 18, Oct 3, and Oct 27) and a trend channel line overshoot.
• The problem with the bull’s case is that the move down is quite strong, with stronger bear bars and the bull bars not getting sustained follow-through buying.
• The bulls will need a strong reversal bar or a micro double bottom before they would be willing to buy aggressively.
• Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
• The market may gap down on Monday. Small gaps usually close early.
• Odds continue to slightly favor the market to trade at least a little lower.
• Traders will see if the bears can get another strong bear bar, or will the market trades slightly lower, but closes with a long tail or a bull body.
• While the market may still trade sideways to down for a couple more weeks, the bull trend remains intact; higher highs, higher lows.

The Daily S&P 500 Emini chart

• The Emini traded slightly higher earlier in the week but sold off from Wednesday into Friday, forming 3 consecutive bear bars.
• Last week, we said that the odds slightly favor the market to trade at least a little lower. Traders will see if the bears can create sustained follow-through selling or will the market trade slightly lower but stall not far away from the October 3 low area.
• This week formed the third leg down since the July 27 high. 
• The bears want a strong breakout below the bull trend line with sustained follow-through selling. So far, they got what they wanted.
• The move down is in a strong bear channel with stronger bear bars. Odds favor at least a small second leg sideways to down after a larger pullback.
• However, it has also lasted a long time and is slightly climactic. A small pullback can begin within 1-3 weeks.
• If there is a larger pullback (lasting at least a few weeks), the bears want a larger second leg sideways to down to retest the current leg extreme low (now Oct 27).
• The bulls want a reversal from a wedge bull flag (Aug 18, Oct 3, and Oct 27) and a trend channel line overshoot.
• They see the current move down as a deep pullback of the whole rally which started in October 2022 low.
• They hope to get a retest of the July 27 high and a strong breakout above.
• The bulls will need at least a strong reversal bar or a small double bottom before they would be willing to buy aggressively.
• Since Friday was a bear bar closing in its lower half, it is a sell signal bar for Monday.
• Odds slightly favor the market to trade at least a little lower.
• Traders will see if the bears can create sustained follow-through selling or will the market trade lower but stall and form a climaxing reversal or a micro double bottom.
• For now, while the market may still trade sideways to down, the bull trend remains intact. 

Trading room

Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.

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