Weekly E-mini Tight Bull Channel

Market Overview: S&P 500 E-mini Futures

The market formed a weekly E-mini tight bull channel making new all-time highs. Bulls want a spike and channel pattern lasting several months. Bears need to generate strong bear bars breaking below the minor bull trend line to indicate strength.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

• This week formed a bull doji closing below the middle of its range with a prominent tail above.
• Last week, we said traders would watch whether the market stalled around or above the trend channel line. A breakout above the trend channel line can fail within 2 to 5 bars.
• Bulls have generated a strong rally in a spike and a tight bull channel.
• Bulls want a measured move based on the height of the recent trading range, projecting to around 7550. They almost achieved it this week.
• The next target for the bulls is a measured move to around 8000, based on the height of the initial spike (from the March 30 low to the April 17 high).
• Bulls want a spike and channel pattern lasting several months.
• If the market forms a pullback following the breakout above the trend channel line, bulls want it to be weak and sideways, lacking follow-through, with overlapping candlesticks and prominent lower tails.
• They want at least a small second leg sideways to up to retest the trend extreme high (currently May 14) following any pullback.
• If the market trades lower, bulls want the January 28 high or 20-week EMA to act as support.
• Bears view the move as a parabolic buy climax that is unsustainable without a sideways-to-down pullback.
• Bears want the trend channel line to act as resistance.
• Bears want a failed breakout above the trend channel line within a few bars, followed by a test of the bull trend line.
• Bears want at least a small two-legged sideways-to-down pullback lasting a few weeks.
• Bears need to generate strong bear bars breaking below the minor bull trend line to indicate strength.
• They then want a weak retest of the trend extreme high, forming a lower high major trend reversal or a micro double top.
• If the market trades higher, bears hope this week’s doji will become the final flag of the rally.
• The market has rallied strongly in a 7-bar bull microchannel.
• The market remains Always In Long.
• While the move is strong, it is in a parabolic buy climax, which is unsustainable and tends to attract profit-taking.
• However, strong momentum can sometimes last longer than traders expect.
• Traders will watch whether bulls can create more follow-through buying or whether the market starts to stall around the trend channel line area.
• There could be buyers below the first pullback from such a strong bull microchannel.
• Breakouts above a trend channel line typically fail within 2 to 5 bars, leading to a pullback into the bull channel or a test of the bull trend line.
• For now, the market could still be in the sideways-to-up phase, but the risk of a pullback from an overextended move is increasing.

The Daily S&P 500 E-mini chart

• The market traded higher, testing near the 7550 level on Thursday, followed by a small pullback on Friday.
• Last week, we said traders would watch whether bulls could create a strong breakout above the trend channel line to reach 7500 or the measured move target around 7550, or whether the market would stall around the trend channel line, followed by a pullback in the weeks ahead.
• Bears view the rally as overextended and climactic.
• Bears see a parabolic wedge top (May 1, May 11, and May 14) forming.
• Bears want a failed breakout above the trend channel line, followed by a pullback to test the bull trend line.
• At a minimum, bears want a pullback to retest the start of the channel around the April 23 low area.
• The problem with the bears’ case is that they have not been able to create strong bear bars breaking below the minor bull trend line to demonstrate strength.
• Bears need consecutive strong bear bars closing near their lows and breaking below the minor bull trend line, followed by a weak retest of the trend extreme high to create a short setup.
• Bulls have generated a strong spike and channel pattern, making new all-time highs.
• Bulls want a measured move based on the height of the trading range, projecting to around 7550. They almost achieved it this week.
• Next, bulls want a measured move to around 8000 based on the height of the initial spike (from the March 30 low to the April 17 high).
• They want a strong breakout above the trend channel line with sustained follow-through buying.
• If the market forms a pullback, bulls want it to be weak and sideways, with overlapping candlesticks and prominent lower tails, followed by at least a small sideways-to-up leg to retest the trend extreme high (now May 14).
• If the market trades lower, bulls want the 20-day EMA or the April 23 low to act as support.
• The market is Always In Long.
• The market has formed a spike and channel bull trend.
• The bull channel phase starting from the April 23 low is relatively tight, which acts as a spike on a higher time frame chart.
• Consecutive spikes (climaxes) increase the odds of a minor pullback within a few weeks.
• For now, the market remains in the sideways-to-up phase, with increasing risk of a minor pullback.
• While the market appears overextended and climactic, strong momentum can sometimes last much longer than traders expect.
• Traders will watch whether bulls can create more follow-through buying. If a pullback forms, traders will watch whether it is weak and sideways or strong, with consecutive bear bars closing near their lows.
• If the market trades higher, traders will watch for unusually large bull bars or a blow-off top.
• Or will the market stall above the trend channel line area, followed by a deeper pullback to the April 23 low or the bull trend line in the weeks ahead?

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