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Emini Start of Pullback

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Market Overview: S&P 500 Emini Futures

The market formed an Emini start of PB (pullback) following a climactic rally, ending the 10-bar bull microchannel streak. The bulls want the pullback to be sideways and shallow (with doji(s), bull bars and overlapping candlesticks), possibly forming a double bottom bull flag. The bears will need to create sustained follow-through selling to increase the odds of a deeper pullback.

S&P500 Emini futures

The Weekly S&P 500 Emini chart

Emini Weekly: Pullback, Test of Breakout Point, Emini Start of PB
  • This week’s Emini candlestick was a bear bar closing near its low with a small tail below.
  • Last week, we said that until the bears can create strong consecutive bear bars or a big reversal bar, odds continue to favor the market to remain in the sideways to up phase.
  • This week gapped lower at the open and closed down for the week, ending the 10-bar bull microchannel streak.
  • The bulls got a strong rally in the form of a 10-bar bull microchannel with bull bars closing near their highs. That means strong bulls.
  • The next target for the bulls is the all-time high. They want a strong breakout into new all-time high territory, hoping that it will lead to many months of sideways to up trading.
  • Usually, traders expect buyers below the first pullback from such a strong bull microchannel. Will it be the same this time? Or not because of the climactic nature of the rally?
  • If a two-legged pullback begins, the bulls want it to be sideways and shallow (with doji(s), bull bars and overlapping candlesticks), possibly forming a double bottom bull flag.
  • If there is a deep pullback, they want a second leg sideways to up and the 20-week EMA to act as support.
  • The bears hope that the strong move is simply a buy-vacuum test of what they believe to be a 37-month trading range high.
  • They want a reversal from a higher high major trend reversal (with the July 27 high) or a lower high major trend reversal (with the all-time high). 
  • They also see a large wedge pattern (Feb 2, July 27, and December 28) and a micro wedge (Dec 14, Dec 20, and Dec 28).
  • The problem with the bear’s case is that the rally is very strong. 
  • They will need to create sustained follow-through selling to increase the odds of a deeper pullback.
  • The next targets for the bears are the September 1 high and the 20-week EMA.
  • Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
  • However, it is following a 10-bar bull microchannel which means strong bulls. 
  • Traders would prefer a second entry (Low 2 sell setup) before they would be willing to sell more aggressively.
  • For now, odds slightly favor the market to still be in the sideways to down pullback phase. Traders will see if the bears can create a follow-through bear bar next week.
  • Odds slightly favor the pullback to be minor and the market to still be Always In Long.

The Daily S&P 500 Emini chart

Emini Daily: TBTL Pullback or 20-Gap Bar Buy Setup?
  • The market traded lower for the week, testing the 20-week EMA.
  • Previously, we said that while the market is becoming increasingly climactic until the bears can create strong bear bars, odds slightly favor the market to remain in the sideways to up phase.
  • The bulls got a strong rally with several big gaps that remained open and in a tight bull channel.
  • They hope that the current rally will form a spike and channel which will last for many months after a pullback. 
  • They want the 20-day EMA to act as support and form a 20-Gap-Bar buy setup. They want a reversal from a double bottom bull flag (Dec 20 and Jan 5) or a wedge bull flag (Dec 14, Dec 20, and Jan 5).
  • They want any pullback to be sideways and shallow (with doji(s), overlapping bars, bull bars and candlesticks with long tails below).
  • They see the current pullback as a test of the breakout point (July 27 high).
  • They want a resumption of the trend to retest the all-time high.
  • The bears hope that the strong rally is simply a buy vacuum retest of what they believe to be a 37-month trading range high.
  • They want a reversal down from a lower high major trend reversal (against the all-time high) and a large wedge pattern (Feb 2, July 27, and December 28).
  • They hope to get at least a TBTL (Ten Bars, Two Legs) pullback. They want at least a test of the September 1 high which was the prior breakout point.
  • The bears will need to create consecutive bear bars closing near their lows and trading far below the 20-day EMA to increase the odds of a deeper pullback.
  • For now, the buying pressure remains stronger (tight bull channel) as compared with the selling pressure (small pullback). 
  • Traders see the current pullback as long overdue and within expectation. 
  • Odds slightly favor the market to still be in the sideways to down pullback phase.
  • Traders still expect the market to form at least a small sideways to up leg to retest the prior leg’s extreme high (Dec 28) after the pullback.
  • The market remains Always In Long for now.

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