E-mini Pullback to the 20-Month EMA

Market Overview: S&P 500 E-mini Futures

The market formed an E-mini pullback to the 20-month EMA, with a long lower tail. Bulls want the 20-month EMA to act as support followed by a retest of the all-time high. Bears need sustained follow-through selling below the 20-month EMA to increase the odds of a successful reversal.

S&P500 E-mini futures

The Monthly E-mini chart

• March formed a bear bar closing below the midpoint of its range, with a long lower tail.
• Last month, we said traders would watch for a breakout in either direction from the tight range and the strength of follow-through. Until then, the market may continue oscillating within it in the near term.
• The market broke below the tight trading range, testing the 20-month EMA.
• Bulls see the move as a pullback testing the 20-month EMA and hope it has relieved the prior overbought condition.
• They want the pullback to be weak and sideways, with overlapping bars and prominent lower tails.
• Bulls want a major higher low, followed by a retest of the all-time high.
• They see a large double bottom bull flag (April 7 and March 30) and want a third leg sideways to up (following December 6 and January 28), lasting many months.
• Bulls want the 20-month EMA to act as support.
• Bears got a pullback from a large wedge pattern (July 27, December 6, and October 29) and a micro double top (October 29 and January 28).
• They achieved a measured move to 6,500 based on the height of the 3-month tight trading range.
• Next, they want a larger measured move to 6,200, based on the height of the broader trading range (November 21 low to January 28 high).
• Bears need sustained follow-through selling below the 20-month EMA to increase the odds of a successful reversal.
• If the market trades higher, bears see it as a retest of the prior high and want a lower high major trend reversal, followed by a second leg sideways to down.
• The market formed a pullback testing the 20-month EMA.
• It has broken below the 10-month bull trend line, indicating increasing selling pressure.
• The long tail below the bar suggests bears are not yet decisively strong.
• Traders may expect a retest of the prior high (January 28), forming either a lower high or a higher high.
• If the market trades higher, traders will watch the strength of the move—whether it breaks strongly above the March high or stalls with prominent upper tails, overlapping bars, or bear bodies.
• For now, traders will watch whether bears can generate follow-through selling in April, or if the market instead retests the prior high.

The Weekly S&P 500 E-mini chart

• This week’s candlestick was a bull bar closing near its high, with a prominent lower tail.
• Last week, we said traders would watch whether bears could generate follow-through selling toward the 6,200 measured move area, or if the market would trade lower but reverse with a long tail below or a bull body.
• The market traded lower early in the week but reversed to close as a strong bull reversal bar.
• Bears previously broke below the 13-week tight trading range and achieved a measured move to 6,500 based on its height.
• Next, they want a larger measured move to 6,200, based on the height of the broader trading range (November 21 low to January 28 high).
• The current leg down is in a 6-bar bear microchannel and tight bear channel, indicating persistent selling.
• Bears expect at least a small second leg sideways to down.
• They want pullbacks to be weak and sideways, with overlapping bars and prominent upper tails.
• Bears want the 20-week EMA to act as resistance, forming a lower high major trend reversal followed by a second leg sideways to down.
• Bulls see the move as a deep pullback testing the December 6, 2024 breakout point and the August 1 low, and want these areas to act as support.
• They see a 2-bar reversal and a trend channel line overshoot buy setup and want a retest of the all-time high.
• At a minimum, bulls want a two-legged sideways to up pullback lasting a few weeks.
• Bulls need a strong bull entry bar with follow-through to increase the odds of retesting the high.
• If the market trades lower, bulls want a higher low relative to March 30.
• The market recently broke below the November low with follow-through selling.
• This week’s candlestick closed as a bull bar near its high, which could end the bear microchannel streak.
• There could be sellers on the first pullback above such a strong bear microchannel.
• The candlesticks over the last few weeks have large overlapping ranges with their prior bars, indicating bears are not yet decisively strong.
• The market is likely Always In Short.
• The recent move broke the bull trendline (March 30), indicating increasing selling pressure.
• Traders expect a retest of the January 28 high, forming either a lower high or higher high.
• If the market trades higher, traders will watch the strength of the move — whether it is strong with consecutive bull bars closing near their highs, or weak with overlapping candlesticks, prominent upper tails, and bear bodies.
• For now, traders will watch whether bulls can create a strong entry bar to test the 20-week EMA, or if the market continues lower toward the 6,200 measured move, extending the bear microchannel.

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