S&P 500 E-Mini: Breakout Test in the Offing?

2023.09.04 08:47

Market Overview: S&P 500 Emini Futures

The monthly chart formed an Emini breakout test and a minor pullback. The bulls want a retest of the July 27 high followed by a breakout above. The next targets for the bulls are the March 2022 high and the all-time high. The bears want a reversal down from a lower high major trend reversal. They will need to create follow-through selling to increase the odds of a deeper pullback.

S&P500 Emini Futures

The Monthly Emini Chart

• The August monthly Emini candlestick was a bear bar with a long tail below.
• Last month, we said that a minor pullback can begin at any moment and odds slightly favor there to be buyers below the first pullback. 
• August traded below July’s low but reversed to close in the upper half of its range.
• The bulls managed to create consecutive bull bars closing near their highs trading far above the 20-month exponential moving average.
• The move up since March is in a tight bull channel. That means strong bulls.
• That increases the odds of at least a small second leg sideways to up after a pullback.
• They also got follow-through buying following the breakout above the August 2022 high. 
• They see the pullback in August simply as a breakout test of the August 2022 high breakout point.
• The next targets for the bulls are the March 2022 high and the all-time high. 
• The bears see the current move as a retest of the all-time high.
• They want a reversal down from a lower high major trend reversal.
• The problem with the bear’s case is that they have not been able to create strong selling pressure (bear bars with follow-through selling).
• While August had a bear body, the long tail below indicates that the bears are not yet very strong.
• The bears will need to create follow-through selling in September to increase the odds of a deeper pullback.
• Since August closed in the upper half of its range, it is a buy signal bar albeit slightly weaker (had a bear body).
• Until the bears can create strong bear bars with follow-through selling, odds slightly favor the market to still be in Always In Long.

The Weekly S&P 500 Emini Chart

• This week’s Emini candlestick was a bull bar closing in the upper half with a small tail above.
• Last week, we said if this week’s candlestick is a strong bull bar breaking above the inside bar and closing near its high, it could lead to a retest of the July 27 high.
• In a strong trend, the market can resume the move from a pullback even without a strong signal bar. That may be the case this week.
• Previously, the bulls got a strong trend up (since March) in a tight bull channel. 
• That increases the odds of at least a second leg sideways to up after a pullback. The second leg sideways to up is currently underway.
• The bulls want the pullback to be shallow and weak and for the 20-week EMA to act as support. So far this is the case.
• They want a retest of the July 27 high followed by a strong breakout above.
• The next targets for the bulls are the March 2022 high area and the all-time high.
• If the market trades lower, they want a reversal up from a double-bottom bull flag with the August 18 low.
• They need to create follow-through buying to increase the odds of a retest of the July 27 high and a breakout above.
• The bears got a pullback from a climactic move and tested the 20-week exponential moving average.
• They hope this week was simply a pullback and want another leg down from a lower high major trend reversal or a double top with the July 27 high.
• Since this week’s candlestick was a bull bar closing in the upper half, it is a buy signal bar for next week. It is not a sell signal bar.
• For now, odds slightly favor the market to trade at least a little higher and likely still be in Always In Long.

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