E-mini Bulls Want a Strong Breakout Above

Market Overview: S&P 500 E-mini Futures

The S&P 500 E-mini bulls want a strong breakout above to increase the odds of a trend resumption. Bears want the October 29 high area to act as resistance; if the market trades higher, they hope follow-through buying will be weak, resulting in a failed breakout.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

• This week’s E-mini candlestick was an outside bull doji closing around the middle of its range. A doji is a one-bar trading range where buyers and sellers are balanced.
• Last week, we said traders would watch whether bulls could produce further follow-through buying to new all-time highs, or whether the market would continue to trade sideways near the October 29 high.
• The market traded slightly higher to a new all-time high but has continued to trade sideways around the October 29 high area.
• Bears see the current rally as a retest of the prior trend extreme high (October 29).
• They see three pushes up (December 11, December 26, and January 12), forming a wedge top and a double top (October 29 and January 12).
• Bears want the October 29 high area to act as resistance; if the market trades higher, they hope follow-through buying will be weak, resulting in a failed breakout.
• Bears need consecutive strong bear bars breaking well below the 20-week EMA to show control.
• Bulls see the November 21 selloff as a pullback that relieved overbought conditions.
• They see subsequent pullbacks forming higher lows (December 17, January 2, and January 12), creating an ascending triangle. The three pullbacks can also be viewed as a wedge bull flag (December 17, January 2, and January 14).
• Bulls need a strong breakout with sustained follow-through buying to increase the odds of a trend resumption, with a measured move target near 7,400 based on the height of the recent trading range.
• If the market trades lower, bulls want the 20-week EMA to act as support, forming another leg in a larger developing wedge bull flag (first two legs: November 21 and December 17).
• The past seven candlestick bodies are overlapping in a tight range, indicating breakout mode.
• Buying pressure since the November 21 low has been slightly stronger (bull bars closing near their highs) than selling pressure (bear bars with limited follow-through and prominent lower tails).
• For now, traders will watch whether bulls can produce further follow-through buying to new all-time highs.
• Or whether the market continues to trade sideways near the October 29 high instead.
• Until bears produce consecutive strong bear bars, traders are unlikely to sell aggressively.

The Daily S&P 500 E-mini chart

• The market made a new all-time high on Monday, but there was no follow-through buying. Wednesday gapped down and traded lower but stalled at the 20-day EMA, forming another higher low.
• Last week, we said traders were watching whether bulls could produce further follow-through buying to new all-time highs or whether the market would continue to stall near the October 29 high.
• Bulls believe the November 21 pullback relieved overbought conditions.
• They see subsequent pullbacks forming higher lows (December 17, January 2, and January 14), creating an ascending triangle. The three pullbacks can also be seen as a wedge bull flag (December 17, January 2, and January 14).
• Bulls want a strong breakout with sustained follow-through buying and a measured move to around 7,400 based on the height of the recent trading range.
• Bulls want the 20-day EMA and the bull trend line to act as support.
• If the market trades lower and breaks the bull trend line, bulls want the move to form a higher low relative to the January 2 low and reverse up quickly.
• Bears see the January 12 rally as a retest of the prior trend extreme high (October 29).
• They want the market to reverse from a wedge top (December 11, December 26, and January 12) and a double top (October 29 and January 12).
• If the market trades higher, bears hope follow-through buying will be weak, leading to a failed breakout.
• Bears need consecutive strong bear bars closing near their lows and breaking well below the 20-day EMA and the November 21 low to show control.
• Pullbacks since the November 21 low continue to form higher lows (December 17, January 2, and January 14), reinforcing the ascending triangle.
• The increasingly tight range since December suggests the market is in breakout mode.
• Traders are watching whether bulls can produce further follow-through buying to new all-time highs or whether the market continues to stall near the October 29 high.
• Until bears produce consecutive strong bear bars, traders are unlikely to sell aggressively.

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