S&P 500 E-Mini Slightly Climactic, Always in Long

2023.07.24 08:47

Market Overview: S&P 500 Emini Futures

The market remains Always In Long with the Emini slightly climactic. The bears have not been able to create strong follow-through selling since the March low. They will need to create consecutive bear bars to increase the odds of a deeper pullback. The bulls want any pullback to be shallow and weak (with overlapping bars, doji(s) and bull bars).

S&P500 Emini futures

The Weekly chart

S&P 500 Emini Weekly Chart

• This week’s Emini candlestick was a bull bar with a long tail above.
• Last week, we said that odds continue to slightly favor the market to be in the sideways to up phase and a minor pullback can begin within a few weeks.
• While this week traded higher, it has the look of a reversal bar, closing below the middle of the candlestick.
• The bulls got a strong leg up creating a large wedge pattern (Dec 13, Feb 2, and Jul 19).
• They want a breakout trading far above the August high followed by a measured move using the height of the 6-month trading range which will take them to the March 2022 high area.
• The bulls got follow-through buying this week, and the move up since March is in a tight bull channel.
• Odds continue to slightly favor the market to be Always In Long.
• However, 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 bulls want any pullback to be shallow and weak (with overlapping bars, doji(s) and bull bars).
• The bears want a reversal down from a wedge pattern (Dec 13, Feb 2, and Jul 19) and a trend channel line overshoot.
• They hope to get a failed breakout above the August high. If there is a failed breakout, it would usually occur within 5 bars after the breakout.
• They also see a smaller wedge forming in the last few weeks (Jun 16, Jun 30, and Jul 19).
• At the very least, they want a larger pullback from the trend channel line overshoot.
• 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.
• Since this week’s candlestick closed below the middle of the range, it is a sell signal bar albeit weaker.
• The bears need to create strong follow-through selling to convince traders that they are back in control.
• If there is a pullback, odds slightly favor at least a small second leg sideways to up to retest the current leg high (July 19).

The Daily S&P 500 Emini chart

• The Emini traded higher earlier in the week and pulled back slightly on Thursday and Friday.
• Last week, we said that traders will see if the market continues the climactic move up or will a pullback phase begin soon.
• The bulls want a measured move up using the height of the 6-month trading range which will take them near the March 2022 high.
• They will need to break far above the August high with follow-through buying to increase the odds of reaching the measured move target.
• The move up since March 13 low is in a tight bull channel which means strong bulls.
• However, it has also lasted a long time and is slightly climactic. A minor pullback can begin at any moment.
• If there is a deeper pullback, odds slightly favor at least a small sideways to up leg to retest the current leg high (Jul 19).
• The bears have not yet been able to create credible selling pressure.
• They want a failed breakout above the August high and a reversal from a trend channel line overshoot. They also see a smaller wedge forming (Jun 30, Jun 16, and July 19).
• They will need to create consecutive bear bars closing near their lows, trading far below the 20-day exponential moving average to increase the odds of a deeper pullback.
• If there is a pullback, it would usually last at least TBTL (Ten Bars, Two Legs).
• While the market continues to slightly favor sideways to up, the move up has lasted a long time and is slightly climactic.
• The market may need to trade sideways to down for a few weeks to work off the recent overbought condition. A minor pullback can begin within a few weeks.
• Traders will see if the bears can create follow-through selling next week. If they do, it could be the start of the minor pullback phase.

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