E-Mini’s Bull Reversal Bar

2023.04.03 10:04

The  futures monthly candlestick was an Emini bull reversal bar closing near its high, reversing up from a double bottom bull flag (Dec 22 and Mar 13). Monday is the first trading day of the month. The market may gap up at the open, creating a gap on the Monthly, Weekly and Daily charts. Small gaps usually close early. Odds slightly favor sideways to up in early April.

S&P500 Emini futures

The Monthly Emini chart

• The March monthly Emini candlestick was a bull reversal bar closing near its high.
• Last month, we said that the prior 4 candlesticks were overlapping with alternating bull and bear bodies. Poor follow-through and reversals are more likely within a trading range.
• March broke far below February low but reversed to close at the range’s high and above the 20-month exponential moving average.
• The bulls had a 5-bar bull micro channel. Often, there are buyers below the first pullback below such a strong micro channel. This was the case in March.
• They want another strong leg up from a double bottom bull flag (Dec 22 and Mar 13), completing the wedge pattern with the first 2 legs being December 13 and February 2 highs.
• The bears see the move down from January 2022 as a broad bear channel, with the August 2022 high as the last major lower high.
• If the Emini trades higher, they want a reversal down from a small double top with the February high or a larger double top bear flag with the August 2022 high.
• The problem with the bear’s case is that they have not been able to create follow-through selling since September 2022.
• Since March’s candlestick is a bull bar closing near its high, odds favor April to trade at least a little higher.
• Monday is the first trading day of the month. The market may gap up at the open, creating a gap on the Monthly, Weekly and Daily charts. Small gaps usually close early.
• The candlesticks in the last 10 months are overlapping sideways which means the Emini likely has transitioned into a trading range phase between 4300 and 3500.
• The last 5 candlesticks are overlapping with alternating bull and bear bodies. The Emini is in a smaller tight trading range between 4200 and 3750.
• Poor follow-through and reversals are more likely within a trading range.
• Traders will BLSH (Buy Low, Sell High) until there is a breakout from either direction with follow-through buying/selling.
• Until the bulls can break far above August 2022 high, the broad bear channel may still be in play.
• For now, odds slightly favor sideways to up in early April.
• Traders will see if the bulls can create a follow-through bull bar in April or will the Emini trade slightly higher but close with a bear body or a long tail above.

The Weekly Emini chart

Weekly S&P 500 Emini Chart

• This week’s Emini candlestick was a big bull bar closing near its high.
• Last week, we said that traders will see if the bulls can create another follow-through bull bar or will the Emini continue to stall around the 20-week exponential moving average.
• The bulls got a strong bull bar trading far above the 20-week exponential moving average.
• They 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.
• At the very least they want a retest of February high.
• The bears see the move up to February 2 high simply as a two-legged swing up.
• They got a reversal down from a higher high major trend reversal.
• 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 retest of the February high. They want a reversal down from a larger 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 Emini is in a smaller 23-week trading range around 3750 and 4200.
• Traders will BLSH (Buy Low, Sell High) until there is a strong breakout from either direction with follow-through buying/selling.
• Poor follow-through and reversals are hallmarks of a trading range.
• Since this week was a bull bar closing near its high, it is a good buy signal bar for next week. It may gap up on Monday. Small gaps usually close early.
• For now, odds slightly favor the Emini to trade at least a little higher.
• Traders will see if the bulls get another strong consecutive bull bar or will the Emini trade slightly higher but close with a bear body or a long tail above.

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