S&P 500 E-Mini Week Ahead: Major Trend Reversal Remains a Possibility

01/13/2025

4 minutes read

2025.01.13 03:48

Market Overview: S&P 500 Emini Futures

The market formed a weekly Emini lower high major trend reversal this week. The bears need to create a follow-through bear bar to increase the odds of lower prices. The bulls want the 20-week EMA, the October/November lows, or the bull trend line to act as support.

S&P 500 Emini Futures

The Weekly S&P 500 Emini Chart

This week’s Emini candlestick was an outside bear bar closing near its low and below the 20-week EMA.
Last week, we said that traders would see if the bulls could create a strong bull entry bar (a follow-through bull bar) closing near its high, or if the market would trade slightly higher but stall and close with a long tail above or a bear body instead.
The market opened higher early in the week but reversed to close as an outside bear bar.
The bears got a pullback from a large wedge (Mar 21, Jul 16, and Dec 6), an embedded wedge (Aug 30, Oct 17, and Dec 6) and a micro wedge (Nov 22, Nov 29, and Dec 6).
They hope to get a TBTL (Ten Bars, Two Legs) pullback lasting at least a few weeks. The two-legged pullback is currently underway.
They see this week forming a lower high major trend reversal and want a strong second leg sideways to down.
Since this week closed below the 20-week EMA, the bears need to create a follow-through bear bar to increase the odds of lower prices.
They must create consecutive bear bars closing near their lows to convince traders that they are back in control.
The next targets for the bears are the October / November lows and the bull trend line.
The bulls see the market as being in a broad bull channel and want the market to continue sideways to up for months.
They see the current move as a two-legged pullback and want the market to resume higher from a double bottom bull flag (Nov 4 and Jan 10).
They hope that the pullback will have poor follow-through selling.
They want the 20-week EMA, the October/November lows, or the bull trend line to act as support.
Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
The market may still trade slightly lower towards the October/November lows or the bull trend line area.
Traders will see if the bears can create a follow-through bear bar following this week’s close below the 20-week EMA.
Or will the market trade slightly lower but close with a long tail below or a bull body instead?
The market has entered a trading range phase.
The bears need to do more and create sustained follow-through selling to convince traders that they are back in control.
If the pullback remains sideways and shallow (overlapping candlesticks, with bull bars, doji(s), and candlesticks with long tails below), the odds of a bull trend resumption will increase after that.
For now, odds slightly favor the pullback to be minor and not lead to a reversal.

The Daily S&P 500 Emini Chart

The market opened higher on Monday but lacked follow-through buying. The Emini then traded sideways to down for the rest of the week.
Previously, we said that traders would see if the bulls could create a retest of the all-time high and a breakout above within the next few weeks or if the bears would be able to create a second leg sideways to down (perhaps testing the Oct/Nov lows) instead.
So far, the bears have created 3 pushes down (Dec 20, Jan 2, and Jan 10).
The bears got a reversal from a large wedge pattern (Mar 21, Jul 16, and Dec 6) and an embedded wedge (Aug 30, Oct 17, and Dec 6).
They want a pullback lasting at least a few weeks – a TBTL (ten bars, two legs) pullback. The pullback has fulfilled the minimum requirements.
They want the 20-day EMA or the bear trend line to act as resistance. So far, this is the case.
They want another strong leg down to test the October/November lows and the 200-day EMA from a double top bear flag (Dec 26 and Jan 6).
If the market trades higher, they want a wedge bear flag with the first two legs being December 26 and January 6.
They must create consecutive bear bars closing near their lows to show they are back in control.
The bulls see the market trading in a broad bull channel and want the move to continue for months. They want an endless pullback bull trend.
They want a retest of the all-time high (Dec 6) from a wedge bull flag (Dec 20, Jan 2, and Jan 10).
If the market trades lower, they want the October/November lows or the 200-day EMA to act as support.
So far, the market has transitioned into a trading range.
The bears need to create consecutive bear bars closing near their lows and trading far below the 200-day EMA to increase the odds of a reversal.
The market may still trade at least a little lower.
Traders will see if the bears can create follow-through selling breaking far below the October/November lows or the 200-day EMA.
Or will the bulls be able to create a reversal from a wedge bull flag instead?
For now, odds slightly favor the pullback to be minor and not lead to a reversal.