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Emini futures double top bear flag, but strong leg up

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Market Overview: S&P 500 Emini Futures

The S&P 500 Emini futures double top tested close to the June 2 high. Bears want an Emini double top bear flag, but the small bull bar on the weekly chart is a weak sell signal bar for next week. The move up since July 14 is fairly strong. Odds are the bulls will get at least a small second leg sideways to up after a pullback.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

SP500 Emini Weekly Chart 3rd Bull Bar. Emini Futures Double Top Bear Flag
  • This week’s Emini candlestick was a small bull bar with tails above and below. It closed below last week’s high.
  • Last week, we said that odds slightly favor sideways to up to test the June 2 high and maybe the May 4 high. Traders will see if the bulls get the third consecutive bull bar, or if it trades higher but reverses to close as a bear bar instead.
  • This week traded slightly higher but did not reach June 2 high. The bulls got the third consecutive bull bar, but the small bull body indicates that the bulls are not as strong as they could have been.
  • 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 continuation higher from a higher low major trend reversal. 
  • This is the first series of consecutive bull bars (follow-through buying) since March. There is a 4-bar bull micro channel, and the move up from June 17 low is in a tight channel. 
  • That means persistent buying. The move up is strong enough for traders to expect at least a small second leg sideways to up move.
  • The bears want the Emini to stall around the June 2 high. They want a reversal lower from a double top bear flag followed by a re-test of the June low.
  • The bears hope next week closes as a bear bar below the 20-week exponential moving average.
  • Since this week is a bull bar, it is not a strong sell signal bar for next week.
  • Traders are wondering if the current leg up will be like the 3 bull bars in March which is then followed by a strong leg down, forming the 3rd leg down of a larger wedge pattern.
  • The Emini is currently in a 13-week trading range. It is also in a broad bear channel.
  • The bulls need to create consecutive bull bars trading far above June 2 high to convince traders that a reversal higher may be underway.
  • If the Emini continues to stall around the June 2 high, or around the May 4 high, or the major bear trend line in the next few weeks, odds are sellers will return and attempt to re-test the June low.
  • For now, odds slightly favor at least a small second leg sideways to up after a small pullback.
  • However, if the bears start getting consecutive bear bars closing near their lows, the odds of a 3rd leg down forming a larger wedge pattern increase.

The Daily S&P 500 Emini chart

SP500 Emini Daily Chart Double Top Bear Flag and Tight Channel Up
  • The Emini traded sideways to up, stalling around the June 2 high area.
  • We have said that odds slightly favor sideways to up and traders will see if the bulls get sustained follow-through buying, something they have failed to do since March.
  • So far, the bulls have had good follow-through buying testing near June 2 high.
  • The bulls want 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 want a continuation higher from a higher low major trend reversal after a pullback.
  • 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.
  • The bears want a reversal lower from a double top bear flag with June 2, or around the May 4 high or around the bear trend line.
  • They then want a break below the June low, followed by a continuation of the measured move down to around 3600 based on the height of the 9-month trading range or lower, around 3450 based on the height of the 12-month trading range starting with May 2021.
  • The bears will need to create consecutive bear bars closing near their lows to convince traders that a re-test of the June low may be underway. 
  • Since Friday was a bull bar with a small tail above, it is a weak sell signal bar for Monday.
  • The move up since July 14 is climactic. We may start to see some pullback within the next 1-3 weeks.
  • For now, the move up is strong enough for traders to expect at least a small second leg sideways to up after a pullback.

Trading room

Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. Al talks about the detailed Emini price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.

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