S&P 500 E-Mini: Possible Minor Pullback

2023.08.07 09:09

Is this the start of an minor pullback? The bears will need to create consecutive strong bear bars closing near their lows to convince traders that a deeper pullback could be underway. The bulls want any pullback to be shallow and weak (with overlapping bars, doji(s) and bull bars).

• The July monthly Emini candlestick was another consecutive bull bar closing near its high.
• Last month, we said that odds slightly favor July to trade at least a little higher and traders will see if the bulls can create another follow-through bull bar or will the Emini trade slightly higher but close with a bear body or a long tail above.
• 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.
• They got a strong leg up from the double bottom bull flag (Dec 22 and Mar 13).
• They also got follow-through buying following the breakout above the August high.
• The next target for the bulls is 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).
• Since July was a bull bar closing near its high, it is a buy signal bar for August.
• While a minor pullback can begin at any moment (may have begun in Aug?), odds slightly favor there to be buyers below the first pullback.
• 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 Emini chart

S&P 500 Emini Weekly Chart

• This week’s Emini candlestick was a bear bar closing near its low.
• Last week, we said that odds slightly favor a minor pullback to begin anytime and that there is no credible short setup still.
• The bears want a reversal down from a wedge pattern (Dec 13, Feb 2, and Jul 27) and a micro wedge (Jul 14, Jul 19, and Jul 27).
• At the very least, they want a larger pullback from what seems like an extended trend.
• The problem with the bear’s case is that they have not been able to create strong follow-through selling since the March low.
• They will need to create consecutive strong bear bars closing near their lows to convince traders that a deeper pullback could be underway.
• At the very least, they need to create a follow-through bear bar next week to increase the odds of a pullback to the 20-week exponential moving average.
• The bulls got a strong leg up since March in a tight bull channel.
• Odds are any pullback would likely be minor to be followed by a retest of the current leg extreme (now Jul 27).
• They want a measured move using the height of the 6-month trading range which will take them to the March 2022 high area.
• The move up has lasted a long time (4 months) and is slightly climactic.
• The market may need to trade sideways to down to work off the overbought condition. The minor pullback may have begun this week.
• The bulls want any pullback to be shallow and weak (with overlapping bars, doji(s) and bull bars).
• Since this week’s candlestick was a bear bar closing near its low, it is a sell signal bar for next week.
• The Emini may gap down at the open. Small gaps usually close early.
• For now, odds slightly favor the market to still be in the sideways to down pullback phase.
• Traders will see if the bears can create strong follow-through selling or will the pullback remain sideways and weak (with overlapping bars, doji(s) and bull bars).

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