The S&P 500 E-Mini formed a weekly E-Mini follow-through selling testing the bull trend line. The bulls want the pullback to form a higher low followed by a resumption of the broad bull channel.
The bears want a TBTL (Ten Bars, Two Legs) pullback trading far below the 20-week EMA. At the very least, they want a retest of the April 19 low, even if it forms a higher low.
S&P 500 E-Mini Futures
The Weekly S&P 500 E-Mini Chart
- This week’s E-Mini candlestick was a bear bar with a long tail below closing in its lower half.
- Last week, we said that the odds slightly favor the profit-taking phase has begun. Traders would see if the bears can create a follow-through bear bar, even if it is just a bear doji or if there would be an attempt to form a small retest of the prior high.
- The bears managed to create follow-through selling this week. The long tail below the candlestick indicates that the bears are not yet as strong as they want to be.
- They got a reversal from a higher high major trend reversal, a wedge pattern (Jul 27, Mar 21, and Jul 16) and a trend channel line overshoot.
- They also see an embedded wedge (May 23, Jun 28, and Jul 21) and a final flag pattern (sideways consolidation from the mid to the end of Jun).
- They want a TBTL (Ten Bars, Two Legs) pullback trading far below the 20-week EMA.
- At the very least, they want a retest of the April 19 low, even if it forms a higher low.
- The bulls hope that the market is still in the broad bull channel phase.
- They want the pullback to form a higher low followed by a resumption of the broad bull channel.
- If the marker trades lower, they want the 20-week EMA or the bull trend line to act as support.
- They hope to get at least a small retest of the all-time high, even if it only forms a lower high.
- Since this week’s candlestick is a bear bar closing in its lower half, it is a sell signal bar for next week.
- Because the prior rally lasted a long time and was climactic, odds slightly the sideways to down pullback lasting at least a few weeks.
- Traders will see if the bears can create another follow-through bear bar, closing below the 20-week EMA.
- Or will the market trade slightly lower but stall around the July 25 low or the 20-week EMA area?
- For now, the market remains in the sideways-to-down pullback phase.
- If a pullback (bounce) forms and it is weak and sideways, the odds of another leg sideways to down to retest the current leg low (now July 25) will increase.
The Daily S&P 500 E-Mini Chart
- The market traded higher earlier in the week but gapped down on Wednesday with follow-through selling on Thursday. Friday was an inside bull bar with a prominent tail above.
- Last week, we said that the odds slightly favor the pullback phase has begun. Traders will see if the bears can continue to create strong bear bars in the weeks ahead. Or will the pullback end up as a sideways trading range instead?
- So far, the selloff has retraced almost 5% and has strong bear bars and weak pullback. The market attempted to form a strong reversal on Thursday but ended up being an intraday bull trap.
- The bears got a reversal from a higher high major trend reversal and a large wedge pattern (Jul 27, Mar 21 and Jul 16).
- They got a reversal from an embedded wedge in the current leg up (May 23, Jun 28, and Jul 16) and from a final flag pattern (starting from the second half of Jun).
- If the market trades slightly higher, they want another leg down, completing the wedge with the first two legs being July 19 and July 25.
- At the very least, they want a retest of the April 19 low, even if it only forms a higher low.
- If there is a deep pullback, they want a reversal from a double-top bear flag with July 23 or from a lower high major trend reversal.
- The bulls hope that the rally is in a (broad) channel phase.
- They want the pullback to form a higher low followed by a resumption of the broad bull channel.
- They see the current pullback simply as a retest of the prior breakout point (May 23).
- The bulls will need a strong reversal bar or at least a small double bottom before traders will conclude that the pullback phase could be over.
- So far, the selloff has strong consecutive bear bars, and the pullback (bounce) is small and lacks follow-through buying.
- The odds continue to slightly favor the market to still be in the sideways to down pullback phase.
- If there is a deeper pullback (bounce), traders will see the strength of the pullback.
- If it is weak and sideways, the odds of another leg down from a double-top bear flag with July 23 will increase.
- Traders expect the current move to have at least two or three legs (wedge).
- For now, traders will see if the bears can continue maintaining the tight bear channel (small pullback followed by strong selloff).
- Or will the market trade slightly lower and then start to stall, forming a deeper pullback (bounce) instead?