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Emini Profit Taking

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Market Overview: S&P 500 Emini Futures

The market has entered an Emini profit-taking and pullback phase. The bears want at least a second leg sideways to down after a pullback. The bulls hope to get at least a small retest of the prior trend extreme high (Mar 21), even if it only leads to a lower high (thereby forming a lower high major trend reversal). They hope that the 20-week EMA will act as support.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

Emini Weekly: Profit Taking PB Started, Emini profit taking
  • This week’s Emini candlestick was a big bear bar closing near its low and below the 20-week EMA.
  • Last week, we said that traders will see if the bears can create more follow-through selling. If they do, it could be the start of a two-legged pullback lasting at least a few weeks.
  • The bulls have a strong rally in the form of a tight bull channel. 
  • They hope that the rally will lead to months of sideways to up trading after a pullback.
  • The pullback following the climactic rally is now underway.
  • They hope to get at least a small retest of the prior trend extreme high (Mar 21), even if it only leads to a lower high (thereby forming a lower high major trend reversal).
  • They hope that the 20-week EMA will act as support.
  • The bears got a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 21). 
  • They see a parabolic wedge in the third leg up since October (Dec 28, Feb 12, and Mar 21), an embedded wedge (Feb 12, Mar 8, and Mar 21) and a micro wedge top (Mar 21, Mar 28, and Apr 4). They also got a final flag reversal (ioi pattern in March).
  • 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 selloff this week has retraced more than 5% and has tested the 20-week EMA.
  • The move down is strong enough to favor at least a small second leg sideways to down after a pullback.
  • The bears need to create follow-through selling following this week’s close below the 20-week EMA to increase the odds of more downside.
  • If the market trades higher, they want a reversal from a lower high major trend reversal.
  • Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
  • Traders will see if the 20-week EMA will act as temporary support even if the market temporarily trades below it.
  • Traders should be open for the possibility of a pullback (bounce) followed by a second leg sideways to down after that in the weeks ahead.
  • Can the market gap down and continue to sell off to the bull trend line? The odds of this happening are lower, but traders should be open to such a situation and trade with the trend should it happen.
  • For now, traders will see if the bears can create more follow-through selling next week or will the market stall around (slightly below) the 20-week EMA area and form a pullback thereafter.
  • The odds favor at least a small second leg sideways to down after a pullback.

The Daily S&P 500 Emini chart

Emini Daily: Profit Taking PB Started, at Least 2-Legged
  • The market opened higher on Monday but reversed into a big bear bar. The market continued to sell off for the rest of the week.
  • Last week, we said that the bears need to create sustained follow-through selling trading far below the 20-day EMA to show that they are at least temporarily back in control. They got what they wanted.
  • The bears got a reversal from a higher high major trend reversal, a large wedge pattern (Feb 2, July 27, and Mar 21) and a parabolic wedge (Dec 28, Feb 12, and Mar 21).
  • They also see an embedded wedge in the current leg up (Mar 4, Mar 8, and Mar 21) and a micro wedge top (Mar 21, Mar 28, and Apr 4).
  • The breakout above the tight trading range (in the first half of March) was disappointing with poor follow-through buying, increasing the odds of a minor reversal from a final flag.
  • The profit-taking pullback has begun.
  • If the market trades higher, the bears want the 20-day EMA to act as resistance and want at least a small second leg sideways to down after the pullback.
  • The bulls got a strong rally which lasted over 5 months.
  • They hope that the current rally will form a spike and channel which will last for many months after a deeper pullback.
  • They hope to get at least a small retest of the prior high (Mar 21) even if it forms a lower high.
  • This week, the bears managed to get strong follow-through selling below the 20-day EMA which means the pullback phase has begun.
  • The selloff is strong enough for traders to expect at least a small second leg sideways to down after a pullback.
  • Traders will also see if there will be at least a small retest of the prior high (Mar 21). If there is and especially if it is weak (and maybe stalls around the 20-day EMA), the odds of another leg down from a lower high major trend reversal will increase.

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