E-mini Bulls Want a Strong Breakout

Market Overview: S&P 500 E-mini Futures

The S&P 500 E-mini bulls want a strong breakout above the ascending triangle pattern with sustained follow-through buying 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 a bull bar closing near its high.
• Last week, we said traders would watch whether bulls could get follow-through buying to new all-time highs or whether the market would stall near the December 11 high and pull back to retest the 20-week EMA.
• The market made a new all-time high but did not break far above the October 29 high.
• 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 9), forming a wedge top and a double top (October 29 and January 9).
• 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 strong follow-through selling 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 and January 2), creating an ascending triangle.
• 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 developing wedge bull flag (first two legs: November 21 and December 17).
• The past six 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).
• Because this week’s candlestick closed near its high, the market could gap up next week; small gaps often close early.
• 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 traded sideways to up this week, making a new all-time high on Friday.
• Previously, we said traders were watching whether bulls could get further follow-through buying to new all-time highs or whether the market would continue to stall near the December 11 high instead.
• Bulls believe the November 21 pullback relieved overbought conditions.
• They see subsequent pullbacks forming higher lows (December 17 and January 2), creating an ascending triangle.
• 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, bulls want a higher low relative to the December 17 low.
• Bears see the January 9 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 9) and a double top (October 29 and January 9).
• 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 and January 2), 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 instead.
• Until bears produce consecutive strong bear bars, traders are unlikely to sell aggressively.

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