Market Overview: S&P 500 E-mini Futures
On the weekly chart, E-mini bears need strong follow-through selling. Bears want a two-legged sideways-to-down pullback lasting a few weeks. Bulls see this week as a pullback and want at least a small sideways-to-up leg to retest the all-time high after the pullback, even if it only forms a lower high.
S&P500 E-mini futures
The Weekly S&P 500 E-mini chart
- This week formed an outside bear bar closing near its low.
- Last week, we said traders would watch whether bulls could create more follow-through buying toward the next measured move around 8000 or whether the market would start to form bars with prominent upper tails or bear bars.
- Bulls generated a strong rally in a spike and bull channel from the March 30 low.
- Bulls want a measured move to around 8000, based on the height of the initial spike (from the March 30 low to the April 17 high).
- Bulls see this week as a pullback and want at least a small sideways-to-up leg to retest the all-time high after the pullback, even if it only forms a lower high.
- Bulls hope there are more buyers below the tight bull channel.
- Bulls want the pullback to be weak and sideways, lacking follow-through, with overlapping candlesticks and prominent lower tails.
- If the market trades lower, bulls want the 20-week EMA or the April 23 low (the start of the bull channel) to act as support.
- Bears view the move as a buy climax that is unsustainable.
- Bears want a failed breakout above the trend channel line within a few bars, followed by a test of the bull trend line. This move could be underway.
- Bears want a two-legged sideways-to-down pullback lasting a few weeks.
- Bears generated a strong bear bar breaking below the minor bull trend line this week. They need to create follow-through selling to indicate strength.
- After that, bears want a weak retest of the trend extreme high, forming a lower high major trend reversal or a small double top.
- The market has rallied strongly in a tight bull channel, breaking above the trend channel line.
- While the move is strong, it has lasted a long time without a significant pullback, which is unsustainable and tends to attract profit-taking.
- Breakouts above a trend channel line typically fail within 2 to 5 bars, leading to a pullback into the bull channel or a test of the bull trend line. So far, this appears to be the case.
- Since this week’s candlestick is an outside bear bar closing near its low, it is a sell signal bar for a failed breakout above the trend channel line.
- The market could trade at least a little lower.
- However, this is the first sign of bearish strength since the rally started at the end of March. The first pullback may only be minor.
- Traders will watch whether bears can create a strong bear entry bar testing near the April 23 low area.
- Or whether the market trades slightly lower but finds more buyers below the tight bull channel, followed by a retest of the all-time high within the next few weeks.
- For now, any sideways-to-down pullback would likely be minor, even if it lasts a few weeks.
The Daily S&P 500 E-mini chart
- The market formed a new all-time high early in the week, followed by a pullback that broke below the minor bull trend line and the 20-day EMA on Friday.
- Previously, we said traders would watch whether bulls could create more follow-through buying. If a pullback formed, traders would watch whether it was weak and sideways or strong, with consecutive bear bars closing near their lows.
- Bears view the rally as overextended and climactic.
- Bears want a reversal from a wedge top (May 1, May 14, and Jun 1) and a higher high major trend reversal (the May 19 pullback broke below a minor bull trend line, followed by a higher-high test on June 1).
- Bears want a failed breakout above the trend channel line, followed by a pullback to test the bull trend line.
- At a minimum, bears want a pullback to test the start of the channel around the April 23 low area.
- If the market trades higher within a few weeks, bears want the retest of the trend extreme high to be weak, forming a lower high major trend reversal and a double top.
- Bears need strong follow-through selling to show control.
- Bulls generated a strong spike-and-channel pattern, making new all-time highs.
- Bulls want a measured move to around 8000, based on the height of the initial spike (from the March 30 low to the April 17 high).
- Bulls see this week as a pullback and want the May 19 or April 23 lows to act as support, forming a double bottom bull flag.
- Bulls want any pullback to be weak and sideways, with overlapping candlesticks, bull bars, and prominent lower tails.
- Bulls want a retest of the all-time high after the pullback, even if it only forms a lower high.
- The market rallied in a spike-and-channel bull trend.
- This week, the market broke below the bull channel, the first significant sign of bearish strength since the March 30 low.
- The bull channel phase starting from the April 23 low was relatively tight, which acts as a spike on a higher-time-frame chart.
- Consecutive spikes (climaxes) increase the odds of a minor pullback within a few weeks. The pullback is underway.
- Traders will watch whether bears can create a strong two-legged sideways-to-down pullback toward the April 23 low area.
- Or whether the move remains weak and sideways, with overlapping candlesticks, prominent lower tails and bull bars.
- Traders expect at least a small sideways-to-up leg to retest the trend extreme high after the pullback, whether it forms a lower high or continues the trend.
- For now, the pullback may only be minor.
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