E-Mini: Third Consecutive Bear Bar On Weekly Chart

2022.04.25 16:16

Market Overview: S&P 500 E-mini Futures

The S&P 500 E-mini futures had a third consecutive bear bar and failed on the weekly chart. Odds slightly favor sideways to down early next week. It may even gap down on Monday. However, small gaps usually close early.

Bears want a test of the February low followed by a strong breakout and a measured move down. Bulls wish to have a bull body next week, even though the E-mini may trade lower first.

E-Mini Weekly Chart

Weekly S&P 500 E-Mini Chart

• This week’s E-mini candlestick was a big outside bear bar with a small tail below and a long tail above.
• It was a failed failure. The bears broke below last week’s low early in the week but reversed and traded above last week’s high, triggering the high 1 buy entry. It then reversed lower again, breaking far below last week’s low.
• There are trapped bulls above last week’s high. A failed failure increases the odds of at least slightly lower prices.
• Last week, we said odds slightly favor the E-mini to trade at least slightly lower, and if the bears get another bear bar, especially if it is big and closes near the low, the odds will swing in favor of a test of the February low.
• Bears want the E-mini to reverse lower from a double top bear flag (February 2 high and March 29). This week, they got the 3rd consecutive bear bar, which represents follow-through selling.
• The bears want a strong break below the February 24 low which is the neckline of the double top bear flag, and a measured move down towards 3600 based on the height of the 8-month trading range.
• The bulls hope this is simply a deep pullback and a sell vacuum to test the February low.
• However, 3 consecutive bear bars closing near the low means persistent selling. Since this week was a big bear bar closing near the low, it is a weak buy signal bar for a strong reversal up.
• The bulls will need a strong reversal bar or at least a micro double bottom before they would be willing to buy aggressively from a higher low major trend reversal pattern.
• The bulls hope that next week will be a bull reversal bar closing at the high, even if it trades lower first earlier in the week.
• Al said that the E-mini has been oscillating around 4,400 for 9 months. That price might well end up being in the middle of the trading range. Since the top of the range is about 400 points higher, the bottom could be 400 points lower. That is below the February low and around the 4,000 Big Round Number.
• If it gets there, traders will then wonder if the E-mini might fall for a measured move down from the February/March double top. That would fill the gap above the March 2021 high on the monthly chart.
• The E-mini is currently trading around the lower half of the 8-month trading range. Confusion is the hallmark of a trading range.
• Trading ranges tend to disappoint both the bulls & bears and have poor follow-through. Traders will BLSH (Buy Low Sell High) and scalp.
• Odds are, if the E-mini reaches around the February low, we will see buyers around the low of the trading range.
• There have not been 4 consecutive bear bars since the Covid crash. Will next week be another bear bar? Or will the bears be disappointed with a bull bar instead?
• We have said that odds of the prior leg up from March 14 was a bull leg within a trading range, not the start of a new bull trend.
• The current leg down, even if it reaches the February low, would likely be a bear leg and not the start of the bear trend.
• Since this week was an outside bear bar closing near the low, it is a good sell signal bar for next week.
• It may even gap down at the open. However, small gaps usually close early.
• Because it was also a failed failure, odds favor at least slightly lower prices next week.
• If bears get another bear bar next week, especially if it is big and closes near the low, the odds of testing the February low increases significantly.

S&P 500 E-Mini Daily Chart

E-Mini Daily Chart

• The E-mini gapped down slightly on Monday but closed as a bull doji. Tuesday reversed higher from a failed breakout below the wedge bull flag. Wednesday gapped higher, but the bulls did not get a follow-through bar.
• Thursday gapped higher once again but reversed to close as a big outside bear bar near the low. Friday continued the selloff and broke below the wedge bull flag.
• Last week, we said the bulls wanted a reversal higher from a wedge bull flag, but there were two problems with their case: 1) The bears are starting to get big bear bars closing near the low, and 2) The bull bars have weak or no follow-through buying.
• This week was a bear breakout below the wedge bull flag and a second leg down from the March 29 high.
• We said that if the bears manage to get strong consecutive bear bars trading far below the March 3 high, the odds of a test of February low increases. This remains true.
• The bears want the E-mini to reverse lower from a double top bear flag (February 2 and March 29). They then want a strong break below February 24 low and a measured move down to around 3600 based on the height of the 8-month trading range.
• The bulls want the rally from March 14 low to re-test the trend extreme, followed by a breakout to a new all-time high. The bulls expected at least a small 2nd leg sideways to up. However, the pullback so far is deep with big bear bars.
• The bulls hope that this is simply a deep pullback and wants a reversal higher from a higher low major trend reversal.
• The bulls need to start creating strong consecutive bull bars and prevent a strong breakout below the February low.
• The market has been in a trading range for 8 months. Lack of clarity is the hallmark of a trading range. The trading range is more likely to continue than a strong breakout from either direction.
• We have been saying that the rally from the March 14 low to March 29 high was likely a bull leg within a trading range and not the start of the bull trend.
• Similarly, as strong as the current pullback is, odds are it is a bear leg within the trading range, not the start of the bear trend.
• We will likely see traders BLSH (Buy Low Sell High) at the extremes of the trading range.
• Al said that the E-mini has been oscillating around 4,400 for 9 months. That is below the February low and around the 4,000 Big Round Number. That price might well end up being in the middle of the trading range. Since the top of the range is about 400 points higher, the bottom could be 400 points lower.
• If it gets there, traders will then wonder if the E-mini might fall for a measured move down from the February/March double top. That would fill the gap above the March 2021 high on the monthly chart.
• Since Friday was a consecutive big bear bar closing near the low, odds slightly favor at least slightly lower prices on Monday. It may even gap down on Monday. Remember that small gaps usually close early.
• The bulls will need at least a strong reversal bar or a micro double bottom with follow-through buying before they would be willing to buy aggressively.
• Traders will be monitoring whether this is a sell vacuum test of the February low and buyers appear below or if the bears continue to get strong consecutive bear bars and a breakout below February low.

Source