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Emini Bear Reversal Bar at Major Bear Trend Line

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Market Overview: S&P 500 Emini Futures

The S&P 500 Emini futures tested above May 4 high with Emini bear reversal bar just shy of the major bear trend line. Bears want a reversal lower from a wedge bear flag (June 28, July 29 and Aug 16), but the move up is in a tight bull channel. The bears will need to create a follow-through bear bar next week to increase the odds of a re-test of the June low. For now, the move up is strong enough for traders to expect 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 Bear Reversal Bar at Bear Reversal Line on Weekly Chart
  • This week’s Emini candlestick was a bear bar closing near the low with a long tail above.
  • Last week, we said that the May 4 high and the major bear trend line are close enough that they may act as magnets. The Emini may need to test them first before we see some profit taking (pullback).
  • This week, the Emini traded above May 4 high but was just short of the bear trend line before some profit-taking activity started.
  • 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 and the move up from June 17 low is in a tight channel. That means persistent buying. 
  • There is a 6-bar bull micro channel, but that streak would likely end next week. There are often buyers below the first pullback after such a streak.
  • 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 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 want a strong leg down like the one in April. The bears will need to create consecutive bear bars closing near their lows to increase the odds of 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 16), but the move up is in a tight bull channel.
  • We have said that 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 bear bar closing near the low, it is a good sell signal bar for next week. Next week may gap down at the open, however, small gaps usually close early.
  • The bears will need to create a follow-through bear bar next week to increase the odds of a re-test of the June low. 
  • Bulls want next week to be a bull bar even though it may trade slightly lower first.
  • For now, the move up is strong enough for traders to expect at least a small second leg sideways to up after a pullback.
  • However, if the bears start getting consecutive bear bars closing near their lows, the odds of a re-test of the June low and a 3rd leg down of a larger wedge pattern may be forming.

The Daily S&P 500 Emini chart

SP500 Emini Daily Chart Wedge Bear Flag Tight Channel Up
  • The Emini traded above the May 4 high on Tuesday but was just shy of the major bear trendline.
  • Last week, we said that odds slightly favor a test of the May 4 high and the bear trend line. We may start to see some pullback within the next couple of weeks. 
  • 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.
  • The bulls got a reversal higher from a trend channel line overshoot and a wedge bottom (Feb 24, May 20 and June 17).
  • They then want a continuation higher from a higher low major trend reversal after a pullback. 
  • 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 16) 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. 
  • The move up since July 14 is climactic. We may start to see some pullback within the next couple of weeks. It may have started this week, or after a micro double top, which means another small leg up to test Aug 16 high.
  • However, the move is in a tight bull channel. It increases the odds of at least a small second leg sideways to up after a larger pullback. This remains true.
  • The first target for the bears is the 20-day exponential moving average.

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