Market Overview: S&P 500 Emini Futures
The market formed a weekly Emini higher high MTR (major trend reversal) pattern. The bulls need to create a follow-through bull bar to confirm the breakout above the all-time high, even if it is only a bull doji. The bears need to create a few strong bear bars to increase the odds of retesting the April 19 low.
S&P500 Emini futures
The Weekly S&P 500 Emini chart
- This week’s Emini candlestick was a bull bar closing in its upper half with a long tail below and closing below the May 23 high.
- Last week, we said that traders will see if the bulls can create another strong breakout into all-time high territory or will the market continue to stall around the current all-time high area.
- The Bulls got a breakout into new all-time high territory, but it was not a strong breakout. The market has been stalling around the March 23 high area for the last 3 weeks.
- They hope that the rally will lead to months of sideways to up trading (broad bull channel). They hope that the broad bull channel phase has begun.
- They want to get another strong leg up completing the wedge pattern with the first two legs being July 27 and March 21. The third leg up is currently underway.
- Since this week made a new high, the bulls need to create a follow-through bull bar to confirm the breakout, even if it is only a bull doji.
- If the market trades lower, they want the pullback to form a higher low or a double bottom bull flag with the May 31 or the April 19 low. They want the 20-week EMA to act as support.
- Previously, the bears got a reversal from a higher high major trend reversal (against 2021 high) and a large wedge pattern (Feb 2, July 27, and Mar 21).
- The selloff retraced more than 5% and tested the 20-week EMA. However, the bears were not able to create the second leg sideways to down.
- They now want a reversal from a higher high major trend reversal or a double top with the March 21 high.
- They also see a smaller higher high major trend reversal in the current leg up (against the May 23 high).
- They want a TBTL (Ten Bars, Two Legs) pullback trading far below the 20-week EMA.
- At the very least, they want a retest of the April 19 low, even if it forms a higher low.
- The bears need to create a few strong bear bars to increase the odds of retesting the April 19 low.
- Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week.
- Traders will see if the bulls can create a follow-through bull bar and a breakout into all-time high territory.
- Or will the market continue to stall around the current all-time high area?
- If the market continues to stall here, we may see a deeper pullback develop within a few weeks.
- Moving forward, if the market has entered a broad bull channel or a trading range phase, traders should expect more two-sided trading.
- Side note: the FOMC statements and minutes next week can potentially be a catalyst for volatility.
The Daily S&P 500 Emini chart
- The market traded sideways to up for the week. Friday was an outside bull doji closing in its lower half and below the May 23 high.
- Previously, we said that if the market continues to stall around the all-time high area, we may start to see more profit-taking activity in the weeks ahead.
- So far, the market continues to trade slightly above the prior all-time high (Mar 21) area for the last 3 weeks.
- The bears see the current move simply as a retest of the prior high and want a reversal from a higher high major trend reversal or a double top (with the March 21 high).
- They also see a smaller higher high major trend reversal (against May 23) and a small double top (May 23 and Jun 7).
- They want a two-legged pullback lasting at least a few weeks.
- At the very least, they want a retest of the April 19 low, even if it only forms a higher low.
- They need to create consecutive bear bars closing near their lows and trading below the 20-day EMA to increase the odds of a deeper pullback.
- The bulls hope that the current rally will form a spike and (broader) channel which will last for many months. They hope that the broad bull channel phase has begun.
- They see the move to the 20-day EMA (May 31) simply as a pullback and want another strong leg up (with the first leg being the April 19 to May 23 move).
- If the market trades lower, they want a reversal from a double bottom bull flag (with either May 31 or April 19) and a higher low.
- They want the 20-day EMA and the bull trend line to act as support.
- Friday was an outside bull doji. Sometimes, the candlestick after an outside bar is an inside bar, forming an ioi (inside-outside-inside) breakout pattern.
- Otherwise, it may have a lot of overlapping range with the outside bar.
- So far, the market has traded slightly higher (against Mar 21 high) but not by a significant amount in the last 3 weeks.
- The bears have not yet been able to create strong bear bars with follow-through selling.
- While this can change at any time, until it does, the odds slightly favor the market to remain in the sideways to up phase.
- If the bears start getting strong bear bars with follow-through selling, we may see stronger profit-taking activity begin.
- For now, traders will see if the bulls can create more follow-through buying or will the market continue to stall around the all-time high area.
- If the market continues to stall around the all-time high area, we may start to see more profit-taking activity in the weeks ahead.
- Side note: the FOMC statements and minutes next week can potentially be a catalyst for volatility.
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