Market Overview: S&P 500 Emini Futures

The follow through after ioi (inside-outside-inside) breakout pattern last week. However, the bulls have not yet been able to break above the February 2 high. Buying at the top of a trading range (before a confirmed breakout with follow-through buying) is not an ideal setup. The bears want a reversal down from a higher high major trend reversal and a larger wedge pattern (Dec 13, Feb 2, and May 19).

S&P500 Emini futures

The Weekly S&P 500 Emini chart

Emini Weekly Chart
  • This week’s Emini candlestick was a bull doji closing near its high with a long tail above.
  • Last week, we said that the odds continue to favor the market to still be in the sideways to up phase, until the bears can create credible selling pressure.
  • This week traded below last week’s low but reversed to close near the week’s high.
  • 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.
  • They hope that the recent 6-week tight trading range formed a bull flag around the trading range high.
  • They want another leg up from a double bottom bull flag (May 4 and May 24) and a breakout far above February 2 high followed by a measured move up using the height of the 5-month trading range which will take them to the March 2022 high area.
  • Since this week was a bull doji, it is a follow-through bar following last week’s breakout above the ioi (inside-outside-inside) pattern and the 6-week tight trading range.
  • The bulls need to break far above the February 2 high to increase the odds of higher prices.
  • The next target for the bulls is the August 2022 high.
  • The bears want a reversal down from a higher high major trend reversal and a larger wedge pattern (Dec 13, Feb 2, and May 19).
  • They hope that the 6-week tight trading range is the final flag of the move up and want a reversal back into the middle of the 6-month trading range.
  • 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 reversal bar or a micro double top before they would be willing to sell more aggressively.
  • Since this week was a bull doji closing near its high and a long tail below, it is a buy signal bar for next week. It is not a strong sell signal bar.
  • However, the market is trading around the yearlong trading range high. Buying at the top of a trading range (before a confirmed breakout with follow-through buying) is not an ideal setup.
  • For now, odds continue to favor the market to still be in the sideways to up phase until the bears can create credible selling pressure (consecutive big bear bars closing near their lows).
  • Traders will see if the bulls can create a breakout far above the February 2 high or will the Emini trade slightly higher but close with a long tail above or a bear body.
  • Monday is a public holiday (Memorial Day).

The Daily S&P 500 Emini chart

  • The Emini traded lower earlier in the week, testing the middle of the 6-week trading range. The market then traded slightly higher on Thursday followed by a strong rally on Friday.
  • Last week, we said that the odds continue to slightly favor the market to still be in the sideways to up phase until the bears can create strong bear bars.
  • The bulls see the recent sideways pullback as forming a double-bottom bull flag (Apr 26 and May 4) and a wedge bull flag (Apr 6, Apr 26, and May 4).
  • They want a breakout above February 2 high followed by a measured move using the height of the 6-month trading range which will take them near the March 2022 high.
  • The bulls will need to break far above the February 2 high with follow-through buying to increase the odds of higher prices.
  • Since April 18, the market formed 2 prominent legs down (a sideways pullback) around the 20-day exponential moving average.
  • The bears have not yet been able to create sustained follow-through selling. That was the case again earlier this week (Monday & Tuesday).
  • They see the move up from October 2022 simply as forming a large wedge (Dec 13, Feb 2, and May 19) within a broad bear channel.
  • The bears hope that the recent 6-week tight trading range is the final flag of the move up.
  • If the Emini trades higher, they want a failed breakout above the February 2 high and the market to trade back into the middle of the 6-month trading range.
  • They want a reversal down from the top of the expanding triangle.
  • They need a strong reversal bar or a micro double top before they would be willing to sell more aggressively.
  • Since Friday was a big bull bar, it is a buy signal bar for next Tuesday.
  • However, buying at the top of a trading range and an expanding triangle before a confirmed breakout is not an ideal buy setup.
  • For now, the odds continue to slightly favor the market to still be in the sideways to up phase until the bears can create strong bear bars.
  • Traders will see if the bulls can create a breakout above February 2 high or will the market trade slightly higher but fail around the trading range high.
  • If the bulls repeatedly fail to break higher above the 6-month trading range within a few weeks, the market will then likely do the opposite which would likely lead to a deeper pullback.



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