Monthly E-mini Sideways Trading Range

Market Overview: S&P 500 E-mini Futures

The market formed a monthly E-mini sideways trading range in the last couple of months. Bulls want a resumption of the bull trend, with targets at the 7,200 round number and a 7,400 measured move based on the height of the recent trading range. Bears want a reversal from a large wedge top (July 27, December 6, and October 29) and a small double top (October 29 and December 26).

S&P500 E-mini futures

The Monthly E-mini chart

• The December monthly E-mini candlestick was a bull doji closing around the middle of its range, with prominent tails.
• Last month, we said traders would watch whether bulls could create a retest and breakout above the October 29 high with follow-through buying, or whether the market would stall around the October 29 area and retest the November low.
• The market traded slightly higher to retest near the October 29 high but did not break above it.
• Previously, bulls had a tight bull channel from the April 7 low, showing persistent buying pressure.
• Bulls expected at least a small sideways-to-up leg to retest the trend extreme high (October 29), which occurred (December 26).
• They want a resumption of the bull trend, with targets at the 7,200 round number and a 7,400 measured move based on the height of the recent trading range.
• Bulls need a strong breakout above the October 29 high with sustained follow-through buying to resume the trend.
• If the market trades lower, bulls want the November low to act as support, forming a higher low and a double bottom bull flag.
• Bears want a reversal from a large wedge top (July 27, December 6, and October 29) and a small double top (October 29 and December 26).
• Bears see the rally as climactic and overbought.
• The lack of strong bear bars with follow-through selling remains a problem for the bears.
• The long tail below November’s candlestick further indicates bears are not yet strong.
• Bears need consecutive strong bear bars closing near their lows to show they are regaining control.
• If the market trades higher, bears want any breakout above the all-time high to be weak, resulting in a failed breakout.
• The move up from the April 7 low remains strong, with a tight bull channel and consecutive bull bars closing near their highs.
• The market is Always In Long.
• While the rally looks climactic and overbought, traders will only sell aggressively once bears produce strong bars with sustained follow-through.
• For now, traders will watch whether bulls can break above the October 29 high with follow-through buying, or whether the market continues to stall and retest the November low.

The Weekly S&P 500 E-mini chart

• This week’s E-mini candlestick was a bear bar closing in its lower half, with a small tail below.
• Last week, we said traders would watch whether bulls could create further follow-through buying into new all-time highs, or whether the market would continue to stall around the December 11 high area.
• So far, the market is trading sideways around the December 11 high area.
• Bears view the December 11 rally as a retest of the prior trend extreme high (October 29).
• They see the December 26 move as the second leg sideways to up, forming a double top bear flag (December 11 and December 26) or a wedge bear flag (November 12, December 11, and December 26), leading to a lower high major trend reversal.
• Bears want the December 11 high area to act as resistance. If the market makes a new all-time high, they want the follow-through buying to be weak, resulting in a failed breakout.
• Bears need strong follow-through selling trading well below the 20-week EMA to demonstrate control.
• Bulls view the November 21 selloff as a pullback that relieved overbought conditions.
• They see the December 17 move as the second leg sideways to down within the pullback.
• If the market trades lower, bulls want the 20-week EMA to act as support, forming another leg in a developing wedge bull flag (first two legs being November 21 and December 17).
• Bulls want a resumption of the bull trend, with targets at the 7,200 round number and a 7,400 measured move based on the height of the recent trading range.
• Bulls need a strong retest and breakout above the all-time high with sustained follow-through buying to increase the odds of trend resumption.
• The pullback to the 20-week EMA on November 21 has traders questioning whether overbought conditions have been sufficiently worked off.
• The overlapping range over the past 16 weeks indicates increased two-sided trading.
• For now, traders will watch whether bulls can produce further follow-through buying into new all-time highs, or whether the market stalls around the December 11 high area and pulls back to retest the 20-week EMA.
• Until bears create consecutive strong bear bars, traders are unlikely to sell aggressively.

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