Market Overview: S&P 500 Emini Futures
The S&P 500 Emini futures bear bar with long tail below on June monthly chart. It also overshot the trend channel line. Bears want a measured move down to 3600 based on the height of the 9-month trading range height or lower around 3450, based on the height of the 12-month trading range starting from May 2021. The bulls from the January top as a two-legged pullback. They want a reversal higher from a wedge bull flag (February 24, May 20 and June 17) and a trend channel line overshoot.
S&P500 Emini futures
The Monthly Emini chart
- The June monthly Emini candlestick was a big bear bar with long tail below. June closed slightly below May low.
- Last month, we said that odds slightly favor a test above May high and traders will be monitoring whether June closes as a strong bull bar above May, or a surprise bear bar closing near the low.
- June never traded above May high and sold off below May low by the middle of the month.
- The bears see the move down in June as the second leg down from the 1st leg in April. They want a measured move down to 3600 based on the height of the 9-month trading range height, or lower around 3450, based on the height of the 12-month trading range starting from May 2021.
- Since June was a bear bar, it is a sell signal for July. However, the bear bar with long tail below indicates that the bears are not as strong as they could have been.
- Bulls want the breakout below May low to fail and reverse back up. The bull’s case of a failed breakout would have been stronger had June closed above May low and above the middle of the bar around 3910.
- The bulls see the move down from the January top as a two-legged pullback. They want a reversal higher from a wedge bull flag (February 24, May 20 and June 17) and a trend channel line overshoot.
- The Emini closed below the 20-month exponential moving average in June. The last 2 times this happened were during the sell-off in December 2018 and the Covid-19 sell-off in 2020. The Emini then reversed to close above the 20-month exponential moving average the following month.
- Will July be the same? Or will July be a consecutive close below the 20-month exponential moving average?
- While the sell-off since January reached bear market territory (-20% from the high), there are value investors who are looking to buy these deep (-20%, -30%, -40%, -50%) pullbacks.
- The candlesticks down from January to June also had a lot of overlapping bars. That indicates that the bears are not as strong as they could have been.
- While the Emini may continue to trade slightly lower, odds are the Emini should not trade too far below 3400 which is around a -30% correction from the high.
- The trend channel line overshoot in June also increases the odds of a pullback to begin within 1-2 months.
The Weekly S&P 500 Emini chart
- This week’s Emini candlestick was a bear bar with long tail below.
- Last week, we said that odds favor the Emini to trade at least slightly higher and traders will be monitoring if the bulls get a consecutive bull bar (follow-through buying), something they have failed to do since April.
- This week traded slightly higher, but the bulls failed to get a follow-through bar.
- The bulls hope that this week was simply a deep pullback and wants another leg sideways to up. They want a failed breakout below the May low.
- Bulls see a trend channel line overshoot, and a wedge bottom (Feb 24, May 20 and June 17). There is currently a 3-bar bull micro channel on the chart.
- Bears want a continuation of the measured move down to 3600 or lower around 3450, based on the height of the 12-month trading range starting from May 2021.
- The bears want the Emini to stall around or below the June 2 high, or the bear trend line and reverse lower from a double top bear flag.
- They see the pullback last week as a 50% retracement of the first leg down.
- The bears will need to create a follow-through bear bar next week. If they get that, odds of a re-test of June low and a breakout attempt increase.
- Since this week was a bear bar, it is a sell signal bar for next week. However, the long tail below makes it a weaker sell signal bar.
- Can next week trade higher without trading below this week’s low?
- Yes, it is possible. It would be the second leg sideways to up of the pullback.
- The bulls will need to create consecutive bull bars trading far above the June 2 high to convince traders that a reversal higher may be underway.
- The trend channel line overshoot increases the odds of a 2-legged sideways to up pullback beginning within 1 to 3 weeks. The pullback phase may have started 2 weeks ago.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. Al talks about the detailed Emini price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
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Andrew hey, thanks for the report. Just to understand the wedge bottom calculation method, why does you start to count it (1st leg) from Feb’ and not from Jan’?
A good day to you..
Actually I think either Jan or Feb low is fine..
I use Feb because I see Jan to Feb as a single swing, a 2 legged move which started in Jan, and ended after a pullback and a second leg down in Feb..
As the chart continue to develop, the May + June may end up as a single larger second leg.. (assuming the Emini continue to go down in a broad bear channel pullback)
As Al says, there are many ways to count the legs of a wedge, we just want to know that the market has attempted to push down several times, and may attempt to do the opposite if it does break down after those pushes..
Have a wonderful week ahead Eli! Happy 4th!
Thanks Andrew for clarifying this. Have a great holiday!
On the daily chart I see a two-leg decline from 1/4 to 2/24 and a two-leg correction up to 3/29. From there a spike and channel down with one more new low needed to finish the pattern. We’ll see.
A good day to you.. addressing you is like addressing myself.. 😀
Yeah, I agree.. it is totally possible.. that Jan + feb = Leg 1,
April + June = Leg 2,
If the pullback (correction) continue to be drawn out, then another 2 legged sideways to up bounce like the one leading to 3/29, followed by another drawn out 1-3 months 3rd leg down..
Have a wonderful week ahead Andrew! Happy 4th!