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Emini 4th consecutive bull bar – bull leg in trading range?

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Market Overview: S&P 500 Emini Futures

S&P 500 Emini futures continues the strong rally up, with 4th consecutive bull bar, and likely to test the May 4 high and bear trend line. The move up is strong enough for traders to expect at least a second leg sideways to up after a pullback. The bears want a reversal lower from a wedge bear flag (June 28, July 29 and Aug 13), but because of the strong leg up, the bears will need at least a micro double top or a strong reversal bar before they would be willing to sell aggressively.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

SP500 Emini 4th Consecutive Bull Bar Tight Bull Channel and Wedge on Weekly Chart
  • This week’s Emini candlestick was a bull bar closing near the high with a long tail below.
  • Last week, we said that odds slightly favor at least a small second leg sideways to up after a small pullback. 
  • This week traded higher towards the May 4 high and the major bear trend line. This is the 4th consecutive bull bar now, the first time in 2022.
  • The bulls got a reversal higher from a trend channel line overshoot, and a wedge bottom (Feb 24, May 20 and June 17). They want a second leg sideways to up after a pullback.
  • This is the first series of consecutive bull bars (follow-through buying) since March. There is a 5-bar bull micro channel, and the move up from June 17 low is in a tight channel. That means persistent buying. 
  • The next targets for the bulls are the May 4 high and the major bear trend line.
  • The bulls will need to close far above the bear trend line to increase the odds of a re-test of the all-time high.
  • The consecutive bull bars closing near their highs are increasing the odds that the bear trend has ended, and the Emini may be turning into a trading range.
  • The bears want the Emini to stall around the May 4 high, or the major bear trend line. They want a reversal lower from a lower high followed by a re-test of the June low.
  • They see the current rally as a deep pullback in a broad bear channel. The bears see a wedge bear flag (June 28, July 29 and Aug 13), but the move up is in a tight bull channel.
  • Because of the strong move up, the bears will need at least a micro double top or a strong reversal bar before they would be willing to sell aggressively.
  • Since this week was a strong bull bar, it is a weak sell signal bar for next week. It is a good buy signal bar for next week.
  • Next week may gap up at the open, however, small gaps usually close early.
  • The May 4 high and the major bear trend line is close enough that it may act as a magnet. The Emini may need to test it first before we see some profit taking (pullback).
  • The move up is strong enough for traders to expect at least a small second leg sideways to up move after a pullback.

The Daily S&P 500 Emini chart

SP500 Emini Daily Chart Double Top Bear Flag Tight Channel Up
  • The Emini pulled back slightly earlier in the week but gapped up to close above June 2 high on Wednesday. Thursday was a bear reversal bar, but Friday reversed to close near May 4 high.
  • Last week, we said that the move up is strong enough for traders to expect at least a small second leg sideways to up after a pullback. The move up since July 14 is climactic. We may start to see some pullback within the next 1-3 weeks.
  • So far, the bulls continue to have good buying pressure, while the bear bars are becoming smaller with poor follow-through since July 14.
  • The bulls got a reversal higher from a trend channel line overshoot and a wedge bottom (Feb 24, May 20 and June 17).
  • They want a test of the May 4 lower high, followed by a strong break of the major bear trend line.
  • The bulls then want a continuation higher from a higher low major trend reversal after a pullback. 
  • Friday was a bull bar closing near the high. The Emini may gap up on Monday. Small gaps usually close early.
  • If the gap remains open but gaps down after a few days, it may then form an island top following a wedge pattern at resistance (bear trend line). However, an island top is a minor reversal pattern.
  • The bears want a reversal lower from around the May 4 high or around the bear trend line. They then want to re-test the June low, followed by a breakout and measured move down.
  • There is a wedge pattern (July 22, Aug 3 and Aug 12) since the rally on July 14. However, the move up is in a tight bull channel. 
  • That means strong bulls. The bears will need at least a micro double top or a strong reversal bar before they would be willing to sell aggressively. 
  • We have said that the move up is climactic. We may start to see some pullback within the next couple of weeks. This remains true.
  • However, the move up since July 14 is in a tight bull channel. It increases the odds of at least a small second leg sideways to up after a pullback.
  • For now, odds slightly favor a test of the May 4 high and the bear trend line.

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