E-Mini Follow-Through Bar Above 20-Week EMA

04/10/2023

3 minutes read

2023.04.10 10:04

Al Brooks

Market Overview: S&P 500 E-mini Futures

The formed a weak follow-through bar after closing above the 20-week exponential moving average. While the move up since March 13 low is in a tight bull channel, it could simply be a bull leg within a trading range until there is a strong breakout above February high with follow-through buying.

E-mini futures

The Weekly S&P 500 E-mini chart

Weekly S&P 500 Emini Chart

This week’s E-mini candlestick was almost a perfect small doji bar.
Last week, we said that the odds slightly favor the E-mini to trade at least a little higher.
The E-mini traded slightly higher but closed below last week’s high.
While weak, it was a follow-through bar following last week’s close above the 20-week exponential moving average.
The bulls got a reversal up from a double bottom bull flag with the December low (Dec 22 and Mar 13).
By breaking above the December high (in February), they hope the bear trend of successively lower highs and lower lows has ended.
More likely, they will need to break far above the December and August highs to signal the end of the selloff.
The bulls want another strong leg up completing the wedge pattern with the first two legs being December 13 and February 2. The third leg up is currently underway.
At the very least they want a retest of February high.
The bears got a reversal down from a higher high major trend reversal in February.
They then got a second leg sideways to down from a lower high major trend reversal (Mar 6).
However, they were not able to create follow-through selling in March.
The bears hope that the current pullback is simply a buy vacuum retest of the February high. They want a reversal down from a lower high major trend reversal or a double top with February 2 high.
Because of the strong move-up, the bears will need a strong sell signal bar or a micro double top before they would be willing to sell more aggressively.
The E-mini is in a smaller 24-week trading range around 3750 and 4200. Traders will BLSH (Buy Low, Sell High) within a trading range.
As strong as the current move up is, it could simply be a bull leg within a trading range until there is a strong breakout above the February high with follow-through buying/selling.
For now, odds slightly favor the E-mini to still be in the bull leg phase.
Traders will see if the bulls can continue to create bull bars to test the February high or will the E-mini trade higher, but the bears get a decent sell signal bar within the next few weeks.

The Daily S&P 500 E-mini chart

Daily S&P 500 Emini Chart

The E-mini traded sideways for the week.
Previously, we said that odds slightly favor the E-mini to trade higher and traders will see if the bulls can get sustained follow-through buying, or will the market trade slightly higher but reverse down from a double top bear flag (Mar 6).
So far, the E-mini has traded above March 6 high with some follow-through buying.
The bulls got a breakout above the December high (in February) but did not get sustained follow-through buying.
By trading above the December high, the bulls hope that the bear trend has ended, and the market has either transitioned into a trading range or a bull trend.
More likely, the bulls will need to break far above the December and August highs, to convince traders that the bear trend from January 2022 has ended.
Recently, the bulls got a reversal up from a double bottom bull flag (Dec 22 and Mar 13).
The current leg up from March 13 low is in a tight bull channel, which means persistent bulls.
They want a retest of the February high followed by a breakout and another big leg up, completing the wedge pattern with the first two legs being December 1 and February 2. It is currently underway.
The bears see the move up from October 2022 simply as forming a larger double top bear flag (Aug 16 and Feb 2) within a broad bear channel.
They determined that the August high is the last major lower high, therefore, believe that the E-mini is still in a bear trend.
They want a retest of the October low from a lower high major trend reversal or a double top (Feb 2).
The problem with the bear’s case is that the buying pressure since March 13 low is stronger with bull bars closing near their highs and bear bars having little follow-through.
They need to create consecutive bear bars closing near their lows to increase the odds of lower prices.
For now, odds slightly favor the E-mini to trade at least a little higher, possibly retesting February high.
The E-mini is in a smaller 24-week trading range around 3750 and 4200 within a larger trading range.
Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with follow-through buying/selling.