S&P 500 E-Mini’s Two-Legged Pullback: Can Bears Get a Follow-Through This Week?

2023.09.25 08:50

The weekly chart formed an two-legged pullback testing near the February 2 breakout point. The bulls see the move simply as a pullback and want a retest of the July 27 high followed by a strong breakout above. The bears need to create follow-through selling following this week’s breakout below the ii (inside inside) pattern and close below the 20-week EMA.

S&P 500 Emini Futures

S&P 500 Emini Weekly Chart

• This week’s Emini candlestick was a big bear bar closing near its low.
• Last week, we said that the market may first break out below the inside bar and traders will see if the bears can get follow-through selling or will the market trade slightly lower but reverse to close with a long tail below or a bull body.
• This week broke below the bear inside bar with strong selling and closed below the 20-week exponential moving average.
• Previously, the bulls got a strong trend up (since March) in a tight bull channel. 
• The Bulls hope to get a larger second leg sideways to up after the current pullback.
• They want a reversal up from a double-bottom bull flag (Aug 18 and Sept 22) and the Emini to reverse back above the 20-week exponential moving average.
• They want a retest of the July 27 high followed by a strong breakout above.
• The bears got a two-legged pullback testing near the breakout point (Feb 2).
• This week broke out below the ii (inside inside) pattern and closed below the 20-week EMA. The bears need to create follow-through selling to increase the odds of a reversal.
• Since this week’s candlestick was a big bear bar closing near its low, it is a sell signal bar for next week.
• The market may gap down on Monday. Small gaps usually close early.
• For now, odds slightly favor the Emini to trade at least a little lower.
• Traders will see if the bears can create follow-through selling or will the market trade slightly lower but reverse up with a long tail below or a bull body.
• While the Emini could still trade a little lower, odds slightly favor the market to still be Always In Long.

S&P 500 Emini Daily Chart

• The Emini traded lower and closed below the August 18 low this week. Friday was a follow-through bear bar.
• Last week, we said that odds slightly favor the market to still be in the sideway to down pullback phase and to trade at least a little lower early the week.
• The bears got a reversal from a climactic move and a wedge pattern (Dec 13, Feb 2, and Jul 27).
• They want a second leg sideways to down from a lower high major trend reversal and a double top bear flag (Sept 1 and Sept 14). They got that this week.
• They want a deeper pullback, testing the February 2 high which was the breakout point of the recent rally.
• They will need to create consecutive bear bars closing near their lows, trading far below the August 18 low to increase the odds of a reversal down.
• The selloff from September 14 is in a tight bear channel. It increases the odds of at least a small second leg sideways to down after a small pullback.
• The bulls want a reversal up from a double bottom bull flag (Aug 18) followed by a retest of the July 27 high and a strong breakout above.
• They see the current move simply as a two-legged pullback.
• If the market trades lower, the bulls want a reversal up around the February 2 high, which was the breakout point of the recent rally.
• Since Friday was a small bear bar closing near its low, it is a sell signal bar for Monday.
• The market may gap down on Monday. Small gaps usually close early.
• For now, the market may still be in the sideways-to-down pullback phase.
• Traders will see if the bears can create follow-through selling or will the market trade slightly lower but find buyers around the February 2 high area.
• While the Emini could still trade a little lower, odds slightly favor the market to still be Always In Long.

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