E-mini Spike and Channel Pattern

Market Overview: S&P 500 E-mini Futures

The market formed an E-mini spike and channel pattern in the last few weeks. Bulls want a measured move based on the height of the recent trading range, projecting to around 7550. Bears want any breakout above the trend channel line to fail within a few bars, followed by a test of the bull trend line.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

• This week formed another follow-through bull bar closing near its high in new all-time high territory.
• Last week, we said traders would watch whether the market stalls around the trend channel line or the one above it near 7430.
• The market traded higher to test the next trend channel line around 7430.
• Bulls have generated a strong rally, with consecutive bull bars closing near their highs into new all-time highs.
• Bulls want a measured move based on the height of the recent trading range, projecting to around 7550.
• Bulls want a spike and channel pattern lasting several months.
• If the market forms a pullback following a breakout above the trend channel line, bulls want the move to be weak and sideways, lacking follow-through and with overlapping candlesticks.
• They want at least a small second leg sideways to up to retest the trend extreme high (currently May 8) following any pullback.
• Bears view the move as a parabolic buy climax and unsustainable without a sideways-to-down pullback.
• Bears want the trend channel line to act as resistance.
• Bears want any breakout above the trend channel line to fail 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 strong bear bars following any breakout attempt above the trend channel line to increase the odds of a pullback.
• The market has rallied strongly over the past six weeks, with consecutive bull bars closing near their highs.
• The market remains Always In Long.
• While the move is climactic, consecutive bull bars closing near their highs indicate strength.
• Traders will watch whether the market stalls around the trend channel line or above it.
• If the market breaks above the trend channel line, odds slightly favor the breakout failing within 2 to 5 bars.
• A breakout above the trend channel line would further increase the excessive nature of the parabolic buy climax, which typically leads to a pullback into the bull channel and a test of the bull trend line.
• For now, the market could still trade at least slightly higher. However, because of the climactic nature of the rally, a pullback may occur within a few weeks.

The Daily S&P 500 E-mini chart

• The market traded slightly lower early in the week, followed by a gap up on Wednesday and continuation higher on Friday.
• Previously, we said traders would watch whether bulls could create more follow-through buying into new all-time highs, or whether the market stalls nearby and forms a larger two-legged sideways-to-down pullback.
• Bears view the rally as climactic.
• They want the top of the trend channel line to act as resistance.
• Bears want a failed breakout above the trend channel line, followed by a pullback to test the bull trend line.
• Bears view the current move as the channel phase of the spike and channel pattern.
• At a minimum, bears want a pullback to retest the start of the channel around the April 23 low area.
• Bears see a parabolic wedge top forming (with the first two legs on May 1 and May 7).
• Bears need consecutive strong bear bars closing near their lows to demonstrate control.
• 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 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 8).
• 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 increase the odds of a pullback within a couple of weeks.
• For now, the market could still trade slightly higher. However, the risk of a pullback is increasing.
• Traders will watch whether bulls can create a strong breakout above the trend channel line to reach the 7500 round number or the measured move target around 7550.
• Or will the market stall around the trend channel line, followed by a pullback to the April 23 low or the bull trend line in the weeks ahead?
• Any pullback may only be minor, followed by at least a small sideways-to-up retest of the trend extreme high.

Trading room

Al Brooks and other presenters talk about the detailed E-mini price action real-time each day in the Brooks Trading Course trading room. We offer a 2 day free trial.

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