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Emini Wedge Bear Flag, No Follow-through Buying

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Market Overview: S&P 500 Emini Futures

The S&P 500 Emini futures formed an Emini wedge bear flag on the weekly chart. The bulls did not get follow-through buying. The bulls expect at least a small second leg sideways to up after a pullback. The bears need to create strong consecutive bear bars closing near their lows, similar to August to increase the odds of a retest of the October low.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

Emini Wedge bear Flag on Weekly: No Bull FT Bar, Thanksgiving Week.
  • This week’s Emini candlestick was a bear doji with tails above and below.
  • Last week, we said the odds slightly favor the Emini to trade at least a little higher. Traders will see if the bulls can get a follow-through bull bar. 
  • While this week traded above last week’s high, the Emini reversed to close below it. The bulls did not get a bull follow-through bar.
  • The bulls got a reversal higher from a wedge bottom (Feb 24, June 17 and Oct 13) with a nested wedge (Sept 6, Sept 30 and Oct 13).
  • They then got a second leg sideways to up from a higher low major trend reversal (Nov 3).
  • While the move up from October low is in a tight bull channel, there is a lot of overlapping price action. 
  • That means the bulls are not as strong as they would like to be.
  • The problem with the bull’s case is that the selloff from August was very strong. The sideways to up leg may lead to a lower high. For now, this remains true.
  • The bulls need to create strong consecutive bull bars closing near their highs breaking far above the major bear trend line to signal the end of the correction.
  • The bears got a tight bear channel down testing the June low but failed to get follow-through selling.
  • The bears hope that the current pullback is simply forming a wedge bear flag (Oct 5, Oct 28, and Nov 15) or a double top bear flag (Sept 12) and a lower high.
  • Next week, they will need to create a strong follow-through bear bar to increase the odds of lower prices.
  • They want a retest of the October low followed by a strong breakout and a measured move down to around 3450 or the 3400 Big Round Number which is also 2020 high.
  • Bears see the selloff from January as a broad bear channel. The major bear trend line remains as resistance above.
  • Since this week was a bear doji, it is a weaker sell signal bar.
  • Next week is a shortened trading week due to the Thanksgiving holiday. This slightly increases the odds of more sideways trading.
  • Unless the bears get a surprising big bear spike with subsequent follow-through selling like in August, odds slightly favor at least a small second leg sideways to up after a pullback.

The Daily S&P 500 Emini chart

Emini Daily: Weak FT, Wedge Bear Flag
  • The Emini traded higher on Monday and Tuesday but both days closed as bear bars. Thursday broke below Wednesday’s inside bar but reversed into a bull bar. Friday opened higher but closed as a bear bar with a long tail below. 
  • Last week, we said that the odds slightly favor sideways to up.
  • While this week traded above last week’s high, it was mostly sideways to slightly down.
  • Bulls see the strong selloff from August simply as a sell vacuum testing June low within a broad bear channel. A broad bear channel is almost a trading range that is tilted down.
  • They got a reversal higher from a lower low major trend reversal with the June low, a wedge bull flag (Feb 24, June 17, and Oct 13) and a nested wedge (Sept 6, Sept 30 and Oct 13).
  • They then got the second leg sideways to up from a higher low major trend reversal (Nov 3).
  • This week, the bulls did not get strong follow-through buying. They see this week as a breakout test of the October high.
  • The problem with the bull’s case is that the selloff from August 16 was very strong. Sideways to up pullbacks may lead to a lower high. For now, this remains true.
  • The bulls need to create consecutive bull bars closing near their highs (strong spike up) and trading far above the major bear trend line, to convince traders that a reversal higher is underway.
  • The next targets for the bulls are the September 12 high and the major bear trend line.
  • The bears want a strong breakout below the October low followed by a measured move down to 3450 or slightly lower around the 3400 big round number which is also the 2020 high.
  • They see the current move as a developing wedge bear flag (Oct 5 or 18, Nov 1 and Nov 11) and a double top bear flag with the September 12 high.
  • The bears see the selloff from January as a broad bear channel. If the Emini trades higher, the bears want a reversal from a lower high around the major bear trend line.
  • Since Friday was a bear bar with a long tail below, it is a weak sell signal bar for Monday.
  • Next week is a shortened trading week due to the Thanksgiving holiday. This slightly increases the odds of sideways trading.
  • For now, odds slightly favor at least a small second leg sideways to up after the current pullback.

Trading room

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