| April 10, 2023 08:03AM ET

h2 Market Overview: S&P 500 E-mini Futures/h2

The E-mini S&P 500 futures formed a weak follow-through bar after closing above the 20-week exponential moving average. Although the bearish position since March 13 has been in a solid bull channel, this could be a bull leg within a trading range until follow-through buying leads to a strong breakout above the February high.

h2 S&P500 E-Mini Futures/h2 h3 The weekly S&P 500 E-Mini Chart/h3

  • This week’s E-mini candlestick was almost a perfect little doji bar.
  • Last week, we said the odds favor the e-mini trading at least a little higher.
  • E-mini traded slightly higher but closed below last week’s high.
  • While weak, it was a follow-through bar above last week’s 20-week exponential moving average.
  • Bulls rose in the opposite direction from a double bottom bull flag with December lows (December 22 and March 13).
  • By breaking above the December high (in February), they hope that the bear trend of consecutive lower highs and lower lows has ended.
  • Most likely, they will need to break well above the December and August highs to signal the end of the selloff.
  • The bulls want another strong leg to complete the wedge pattern with the first two legs on December 13 and February 2. The third leg up is currently underway.
  • They want to retake the exam at least in February.
  • In February, the bears moved down to a reversal from a higher major trend reversal.
  • They then get a second leg downward from a lower high main trend reversal (March 6).
  • However, they were not able to generate follow-through sales in March.
  • Bears hope that the current pullback is simply a buying vacuum retest of the February high. They want a reversal down from the lower high major trend reversal or a double top with the February 2 high.
  • Because of the strong move-up, the bears will need a strong sell signal bar or a micro double top before they are willing to sell more aggressively.
  • The E-mini is in a short 24-week trading range around 3750 and 4200. Traders BLSH (Buy Low, Sell High) within the trading range.
  • As strong as the current advance is, this could be a bull leg within the trading range until there is a strong breakout above the February high with follow-through buy/sell.
  • For now, the odds are slim for the E-mini to remain in the bull leg phase.
  • Traders will see bulls continue to form bull bars to test the February high or e-mini trade higher, but bears will get a modest sell signal bar in the next few weeks.

h3 The daily S&P 500 E-Mini Chart/h3

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  • E-mini trades sideways for weeks.
  • Earlier, we said that the odds slightly favor the E-mini trading higher and traders will see if the bulls can get a sustained follow-through, or if the market trades slightly higher but reverses from a double top bear flag (March 6 ).
  • So far, e-mini has traded above March 6 with some follow-through buying.
  • Bulls got a breakout above December highs (in February) but did not get sustained follow-through buying.
  • By trading above the December high, bulls hope that the bear trend has ended, and that the market has either transitioned into a trading range or into a bull trend.
  • Most likely, the bulls will have to break well above the December and August highs, to convince traders that the bear trend since January 2022 is over.
  • Recently, the bulls reversed from the double bottom bull flag (December 22 and March 13).
  • The current leg up from March 13 is in a tight bull channel, meaning continued bulls.
  • They want a retest of the February high followed by a breakout and another big leg up, completing the wedge pattern with the first two legs on December 1 and February 2. It is currently running.
  • Bears look to advance within a broad bear channel from October 2022, similar to the formation of a larger double top bear flag (August 16 and February 2).
  • They determined that the August high was the last major low high, so believe that the E-mini is still in a bear trend.
  • They want a retest of the October low from the low high major trend reversal or double top (February 2).
  • The problem for the bears is that since March 13 the bull bars closed near their highs as buying pressure eased and the bear bars followed very low.
  • They need to form consecutive bear bars that are closing near their lows to increase the odds of their lows.
  • For now, the odds favor the E-mini trading at least a little higher, possibly retesting the February high.
  • The E-mini is in a 24-week trading range around 3750 and 4200 within a wider trading range.
  • Traders will BLSH (Buy Low, Sell High) until there is a breakout in both directions with a follow-through buy/sell.

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