Market Overview: S&P 500 Emini Futures
The Emini stalled around the all-time high by closing as an outside bear doji. The bulls want a strong breakout into a new all-time high territory, hoping that it will lead to many months of sideways to up trading. The bears hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
S&P500 Emini futures
The Weekly S&P 500 Emini chart
- This week’s Emini candlestick was an outside bear doji closing in the upper half of its range.
- Last week, we said that while the market continues to be Always In Long, the rally has lasted a long time and is slightly climactic. Traders expect a minor pullback and are looking for signs of this.
- This week made a new high early in the week but reversed below last week’s low, followed by a retest of the trend extreme high again after that.
- While this week traded higher, the bulls did not get a follow-through bull bar following last week’s close above the prior all-time high.
- The bulls have a tight bull channel. That means strong bulls.
- They want a strong breakout into a new all-time high territory, hoping that it will lead to many months of sideways to up trading.
- However, we may also see some profit-taking activity once the market starts to stall. The process of stalling may have begun this week.
- If a pullback begins, the bulls want it to be sideways and shallow, filled with bull bars, doji(s) and overlapping candlesticks.
- The bears hope that the strong rally is simply a buy-vacuum test of the all-time high.
- They want a reversal from a double top (with the all-time high) and a large wedge pattern (Feb 2, July 27, and Feb 12). They want a failed breakout above the all-time high and the trend channel line.
- They also see a parabolic wedge in the third leg up since October (Nov 22, Dec 28, and Feb 12) and a micro wedge (Jan 24, Feb 2, and Feb 12).
- They hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
- The problem with the bear’s case is that the rally is very strong. They would need to create a few strong bear bars to indicate that they are at least temporarily back in control.
- Since this week’s candlestick is a bear doji, it is not a strong buy signal bar.
- The market trading sideways also indicates a loss of momentum from the bulls.
- The candlestick after an outside bar sometimes is an inside bar forming an ioi (inside-outside-inside) breakout mode pattern. Otherwise, it may have a lot of overlapping range with the outside bar.
- While the market continues to be Always In Long, the rally has lasted a long time and is slightly climactic.
- Traders should be prepared for a minor pullback which can begin within a few weeks. This remains true.
- Traders will see if we start to get more selling pressure or will the bulls continue to create follow-through buying.
The Daily S&P 500 Emini chart
- The market made a new high early in the week but opened lower on Tuesday testing the 20-day EMA. The market then formed a small second leg sideways to up testing the recent leg high. Friday traded higher but reversed into an outside bear bar closing near its low.
- Last week, we said that the rally has lasted a long time and is slightly climactic and traders should be prepared for a minor pullback which can begin within a few weeks.
- This week was trading sideways overlapping last week’s range.
- The bulls got a tight bull channel up testing an all-time high (Jan 2022).
- They hope that the current rally will form a spike and channel which will last for many months after a deeper pullback.
- They hope that Tuesday was simply a minor pullback and want another leg up completing the wedge with the first two legs being January 30 and February 12.
- If there is a deeper pullback, the bulls want at least a small sideways to up leg to retest the current trend extreme high (now Feb 12).
- The bears hope that the strong rally is simply a buy vacuum retest of the prior all-time high.
- They want a reversal down from a double top (with the all-time high), a large wedge pattern (Feb 2, July 27, and Feb 12) and a parabolic wedge (Nov 22, Dec 28, and Feb 12).
- They also see an embedded wedge in the current leg up (Jan 30, Feb 2, and Feb 12).
- If the market continues higher, the bears want a failed breakout above the all-time high.
- They see the rally following the Tuesday pullback simply as a retest of the prior trend extreme high (Feb 12) and want a reversal from a small lower high major trend reversal.
- The bears will need to create consecutive bear bars closing near their lows and trading far below the 20-day EMA and the bear trend line to indicate that they are at least temporarily back in control.
- Since Friday was an outside bear bar, it is a sell signal bar for Tuesday. If the bears can create follow-through selling, it may lead to the start of the pullback phase.
- Odds slightly favor the market to still be Always In Long.
- However, the rally has lasted a long time and is slightly climactic.
- While there are no signs of strong selling pressure yet, traders should be prepared for a minor pullback which can begin within a few weeks. This remains true.
- Traders will see if the bulls can continue to create sustained follow-through buying above the all-time high.
- Or will the market continue to stall around the all-time high area, prompting more profit-taking price action to begin soon?
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