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

Published 09/04/2023, 07:25 AM
ESU24
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Market Overview: S&P 500 Emini Futures

The monthly chart formed an S&P 500 Futures 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

Emini Monthly 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

Emini Weekly 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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