Emini Bear Breakout

Market Overview: S&P 500 Emini Futures

The market formed an Emini bear breakout from the 5-month trading range on the monthly chart. The bears want the third leg down completing the wedge pattern (with the first two legs being Mar 13 and now Apr 4). The bulls hope the July 27 high, or the 200-week EMA will act as support. If the market trades lower, they hope that the October 27 low will act as support.

S&P500 Emini futures

The Monthly Emini chart

• The March monthly Emini candlestick was a big bear bar closing in its lower half with a prominent tail below and closing above the 20-month EMA.
• Last month, we said traders would wait for a strong breakout from either direction of the small trading range and trade in the direction of the breakout for a measured move (based on the height of the trading range).
• The bears got a strong breakout below the small trading range with strong follow-through selling.
• They got a reversal from a wedge pattern (Mar 21, Jul 16 and Dec 6), a double top (Dec 6 and Feb 19) and a triple top (Dec 6, Jan 24, and Feb 19 -).
• They got a measured move based on the height of the trading range which took the market to 5400.
• They then got a leg 1 equals leg 2 measured move which took the market to below 5200 in early April.
• They hope this is the start of a multi-month bear market.
• If there is a pullback, the bears want at least a small sideways to down leg to retest the current leg extreme low (now April 4).
• The bulls want the market to continue in a broad bull channel.
• They hope the market will form a higher low.
• They want the bull trend line, or the July 27 high area to act as support. If the market trades lower, they hope that the October 27 low area will act as support.
• They want the market to reverse back above the 20-month EMA.
• So far, March has traded lower with follow-through selling in April.
• The market remains Always In Short.
• If there is a pullback, there may be a small sideways to down leg to retest the current leg extreme low (now April 4).
• For now, traders will see if April’s candlestick will continue to get bigger and close as a strong bear bar near its low. If this is the case, the odds of more sideways to down in May will increase.
• Or will April’s candlestick close with a long tail below instead?
• Odds slightly favor the market to trade at least a little lower.

The Weekly S&P 500 Emini chart

• This week’s Emini candlestick was a big bear bar closing near its low with a long tail above.
• Last week, we said traders would see if the bears could create a retest and breakout below the March 13 low, or if the market would trade slightly lower but stall around the March 13 low area instead.
• The market opened lower around the March 13 low but lacked follow-through selling and trading higher into midweek. The market gapped down on Thursday and continued to sell off into the closing on Friday.
• The bulls hope the July 27 high, or the 200-week EMA will act as support. If the market trades lower, they hope that the October 27 low will act as support.
• If the market gaps down significantly next week, they hope it would be the end of the current leg and want it to reverse back above the 200-week EMA.
• They must create strong bull bars to show they are back in control.
• The bears have a tight bear channel which means strong bears.
• They got a measured move based on the height of the 23-week trading range which took the market to the 5400 area.
• They also got a larger second leg sideways to down with the first leg being the February 19 high to March 13 low. A leg one equals leg two measured move took the market below 5200.
• If there is a pullback, they want it to be weak and sideways (overlapping candlesticks, doji(s), bear bars, long tails above candlesticks).
• They want the third leg down completing the wedge pattern (with the first two legs being Mar 13 and now Apr 4).
• The market remains Always In Short.
• Since this week’s candlestick is a big bear bar closing near its low, it is a sell signal bar for next week.
• Because the candlestick closed near its low, the market can gap down on Monday. Small gaps usually close early.
• If there is a (very) big gap down at the open, it could be a climactic type of price action and bears may use that as an opportunity to take profits.
• If there is a pullback, odds slightly favor it to be minor followed by at least a small sideways to down leg to retest the current leg extreme low (now Apr 4) after the pullback.
• For now, the market could still trade at least a little lower.
• Traders will see if the bears can continue to create more follow-through selling.
• Or will the market trade lower initially but start to form a minor pullback lasting 1-3 weeks moving forward instead?
• The market remains in the sideways to down phase.

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