Emini bull follow-through bar on weekly chart

Al added a few comments to report

Market Overview: Weekend Market Analysis

The SP500 Emini bulls got bull follow-through buying on the weekly chart. Odds favor a test of the February 2 high. The bulls will need to close far above the February 2 high to convince traders that a re-test of the trend extreme is underway. The bears want the Emini to stall around the February 2 high and reverse lower from a double top bear flag. The rally in the last 2 weeks was in a tight bear channel. Odds slightly favor a second leg sideways to up after a pullback.

S&P500 Emini futures

The Weekly S&P500 Emini chart

• This week’s Emini weekly candlestick was a bull bar closing near the high. It was a bull follow-through bar following last week’s big bull reversal bar from a higher low major trend reversal and a wedge bull flag.
• Last week, we said that odds slightly favor sideways to up and that the bulls will need to close next week as another bull bar to confirm the reversal higher. The stronger the bull bar and the higher the close, the higher the odds that the correction is over. 
• Al said that the market may continue in its eight-month trading range indefinitely. The next target for the bulls is the February 2^nd lower high, which is a major lower high. This remains true.
• Since this week closed near the high and followed a big bull bar closing near the high from last week, odds are good that we will test the February 2 high next week.
• The bulls hope that this is the start of the reversal to re-test the trend extreme followed by a new high. They want consecutive bull bars closing near their highs, like the one from October 4 low. 
• This week’s bull bar closing near the high is a strong buy signal bar for next week. It increases the odds of a gap up on Monday. If the gap is small, it usually closes early.
• Al has been saying since March 15 that the Emini should test the February 2 high before breaking below the February 24 low. But it might pull back to the March 3 high first.
• The bears hope that this is simply a pullback (bounce) from the 2-month correction. They want the Emini to stall around February 2 high and reverse lower from a double top bear flag. They want next week to have a bear body, even though the Emini may trade higher first.
• The bears want a strong break below the February 24 low which is the neckline of the double top bear flag and a measured move down. There is only a 30% chance of a break below that low before a strong break above the Feb 2 high.
• Al said that if the bears get the breakout below February 24 low (only 30% chance currently), it would follow 3 strong reversals up (wedge bull flag). There would be a lot of trapped bulls because everyone expected higher prices. It would likely lead to a 50% chance of a fast sell-off for about a 500-point measured move down to 3600 based on the height of the 7-month trading range.
• Since this week’s candlestick was a strong bull follow-through bar closing near its high, odds slightly favor sideways to up for next week. Since the February 2 high is less than 50 points above Friday’s close, we may even reach it early next week.
• The bulls will need to close far above the February 2 high to convince traders that a re-test of the prior high and a subsequent breakout to a new high is underway.
• If next week trades higher but reverses and close as a bear bar near the low, traders will start wondering if this will lead to a reversal from a double top bear flag.
• The Emini is in an 8-month trading range. The trading range is more likely to continue rather than a strong breakout from either direction.

The Daily S&P500 Emini chart

• The Emini had a small pullback on Wednesday followed by a second leg sideways to up into Friday’s close, closing around the 100-day moving average.
• Last week, we said that odds slightly favor sideways to up, and for a second leg sideways to up to form after a pullback. 
• The rally in the last 2 weeks was in a tight bull channel and strong enough for traders to expect at least a 2^nd leg sideways to up after a slightly larger pullback. If there is a pullback, it may test the March 3 high.
• The bulls want this to be the reversal higher to re-test the trend extreme, followed by a breakout to a new all-time high. They want a strong leg up like the one which started from October 13 low.
• Al said that the February 2 high is a major lower high. If the bulls get two closes above that high, the rally will probably continue up to a new all-time high.
• Alternatively, if the bulls fail to get two closes above that high, the bears will try to get a reversal down from a double top with that high. But even if they do, a continuation of the trading range would still be more likely than a break below the February 24 neckline of the double top bear flag.
• Traders should expect the market to be sideways to up for several more months. This remains true.
• The bears want the Emini to stall around the February 2 high. They then want a reversal lower from a double top bear flag with February 2 high followed by a strong break below February 24 low and a measured move down to around 3600 based on the height of the 7-month trading range. 
• Al said that there is only a 30% chance for the Emini breaking below the February 24 low before a strong break above February 2 high. 
• If there is a bear breakout, it would follow 3 strong reversals up (wedge bull flag). There would be a lot of trapped bulls because everyone expected higher prices. It would be a Surprise Bear Breakout and has a 50% chance of a fast sell-off for about a 500-point measured move (to around 3600).
• The market has been in a trading range for 8 months. Traders are deciding if the bull trend is resuming or if the rally is a bull leg in the trading range. The trading range is more likely to continue than a resumption of the bull trend.
• For now, odds slightly favor sideways to up for next week, and for a second leg sideways to up to form after a slightly larger pullback.
• Traders will be monitoring whether the bulls can test the February 2 high and close far above it, or if the Emini stalls around the February 2 high and reverses lower.

Trading room

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