S&P 500 E-Mini Forms 8-Bar Bull Microchannel

2023.12.18 09:09

Market Overview: S&P 500 Emini Futures

The weekly chart is forming an 8-bar bull microchannel. That means strong bulls. The bulls will need to create follow-through buying following the breakout above the July 27 high. The bears hope the climactic move will lead to a two-legged sideways-to-down pullback.

S&P 500 Emini Futures

• This week’s Emini candlestick was another consecutive bull bar closing in its upper half with a noticeable tail above.
• Last week, we said that odds continue to slightly favor the market to still be Always In Long.
• This week traded and closed above the July 27 high.
• The bulls got a strong rally in the form of an 8-bar bull microchannel with bull bars closing near their highs. That means strong bulls.
• The bulls hope to create a short covering spike above the July 27 high. Bears that have covered will likely not sell again until another significant resistance above (probably above the all-time high next). 
• 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.
• They will need to create follow-through buying next week to increase the odds of a retest of the all-time high.
• If a pullback begins, the bulls want it to be sideways and shallow, with doji(s), bull bars and overlapping candlesticks with long tails below. 
• If there is a deep pullback, they want a reversal up from a higher low major trend reversal 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 36-month trading range high.
• They want a reversal from a higher high major trend reversal (with the July 27 high) or a double top July 27 high.
• The problem with the bear’s case is that the current rally is very strong. 
• They will need to create strong bear bars with sustained follow-through selling to increase the odds of a deeper pullback. So far, they have not yet been able to do so.
• Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week. The risk for new buyers is becoming big because of the large stop required.
• Swing bulls will likely continue to hold their longs established at a much lower price through the anticipated pullback, expecting any pullback to be minor.
• As the trend is becoming increasingly climactic, a small pullback can begin within a few weeks.
• However, until the bears can create strong consecutive bear bars, odds continue to favor the market to remain in the sideways to up phase.
• Odds also favor buyers below the first pullback from such a strong bull microchannel. 
• If there is a deeper pullback, odds slightly favor at least a small second leg sideways to up.
• Traders will see if the bulls can get another follow-through bull bar (even if it is just a bull doji) or will the market close with a bear body and a prominent tail above, beginning the minor pullback phase.

• The market traded higher for the week. Wednesday traded above the July 27 high with some follow-through buying on Thursday. Friday was a small inside doji.
• Last week, we said that the buying pressure remains very strong with bear bars not getting follow-through selling. Odds continue to favor the market to still be Always In Long.
• The bulls got a strong reversal 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 a strong short covering above the July 27 high that will fuel the move towards the all-time high.
• They want a strong breakout into new all-time high territory.
• If a pullback begins, the bulls want the 20-day EMA to act as support and form a 20-Gap-Bar buy setup.
• They want any pullback to be sideways and shallow (with doji(s), overlapping bars, bull bars and candlesticks with long tails below).
• The bears hope that the strong rally is simply a buy vacuum retest of the July 27 high. 
• They want a reversal down from a lower high major trend reversal (against the all-time high) and a double top (with July 27).
• The problem for the bears is that the selling pressure remains weak (no consecutive bear bars) while the buying pressure is very strong (strong bull bars closing near their highs).
• The bears will need to create consecutive bear bars closing near their lows trading far below the 20-day EMA to increase the odds of a reversal.
• For now, the buying pressure remains very strong with bear bars not getting follow-through selling. 
• 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 odds slightly favor any pullback to be minor, followed by a retest of the current leg extreme high (now December 14).

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