S&P 500 Futures: Consecutive Bull Bars Close Above EMA

2023.05.01 08:46

‘s April candlestick consecutive bull bars close above the 20-month exponential moving average (EMA). 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 bears hope the market will stall sideways around the 20-month exponential moving average and reverse lower.

Emini futures

The Monthly Emini chart

• The April monthly Emini candlestick was a small bull bar closing near its high.
• Last month, we said odds slightly favor sideways to up in early April and 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 market was mostly trading sideways throughout the month, and the bulls got a strong 2-day reversal from the low of the month to close near its high in the last 2 trading days. There are potentially trapped bears.
• The bulls managed to create consecutive bull bars closing above the 20-month exponential moving average in April.
• Looking back, whenever this has happened (consecutive bull bars closing above the 20-month exponential moving average), it has increase probability of leading to at least slightly higher prices.
• The bulls 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 next targets for the bulls are the February 2 high and the August 2022 high.
• They will need to create a strong breakout above the February 2 high with follow-through buying to convince traders that the bull trend could be resuming.
• 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 sustained follow-through selling since September 2022.
• The bears hope the market will stall sideways around the 20-month exponential moving average and reverse lower.
• Since April’s candlestick is a bull bar closing near its high, odds favor May 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 12 months are overlapping sideways which means the Emini likely has transitioned into a trading range phase between 4300 and 3500.
• The last 6 candlesticks are overlapping 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 the August 2022 high, the broad bear channel may still be in play.
• For now, May should trade at least a little higher in early April.
• Traders will see if the bulls can create another follow-through bull bar or will the Emini trade higher but close with a bear body or a long tail above.
• If May is a big bull bar closing near its high, it could potentially flip the market to Always In Long.

The Weekly S&P 500 Emini chart

• This week’s Emini candlestick was a bull bar closing near its high with a long tail below.
• Last week, we said that traders will see if the bears can create follow-through selling or will the market trade slightly lower but find buyers instead.
• This week traded below the lows of the last 3 candlestick’s, testing the 20-week exponential moving average but reversed to close near the week’s high.
• The move up from March 13 low is in a tight bull channel. That means strong bulls.
• The bulls want another strong leg up completing the wedge pattern with the first two legs being December 13 and February 2. The third leg up is currently underway.
• The next targets for the bulls are the February 2 high and the August 2022 high.
• They had a 6-bar bull micro channel and there are often buyers below the first pullback from such a strong bull micro channel. This was the case this week.
• If there is a deeper pullback, the bulls want a larger second leg sideways to up to retest the current leg extreme.
• The bears hope that the current leg up is simply a buy vacuum retest of the February 2 high.
• They want a reversal down from a lower high major trend reversal or a double top with February 2 high and a larger wedge pattern (Dec 13, Feb 2, and April 18).
• If the Emini trades higher, they want a failed breakout above the trading range high (February 2)
• The problem with the bear’s case is that they have not been able to create credible selling pressure since the March low.
• They will need to create strong bear bars with follow-through selling to convince traders that a deeper pullback could be underway.
• At the very least, the bears will need a strong sell signal bar or a micro double top before they would be willing to sell more aggressively.
• Since this week was a bull bar closing near its high. It is a good buy signal bar for next week.
• However, the Emini is trading near the top of the 27-week trading range. Buying at the top of a trading range can be risky.
• The Emini may gap up on Monday. Small gaps usually close early. If the gap remains open by the end of the week, it could be a sign of strength from the bulls.
• Traders will see if the bulls can create a retest and breakout above the February high with follow-through buying or will the market continue to stall around the February 2 high area.
• For now, the odds slightly the Emini to trade at least a little higher.

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