Market Overview: S&P 500 E-mini Futures
The S&P 500 E-mini bears want a breakout below the February 5 low and the 20-week EMA, followed by sustained follow-through selling. Bulls want the 20-week EMA to hold as support. If the market trades lower, they want the November 21 low to act as support.
S&P500 E-mini futures
The Weekly S&P 500 E-mini chart
- This week’s E-mini candlestick was an inside bear bar closing in its lower half, testing the 20-week EMA.
- Last week, we said the market could continue trading sideways in the near term.
- So far, the market remains within an 11-week tight trading range.
- Bears see a wedge top (December 11, December 26, and January 12), a double top (October 29 and January 28), and a smaller double top (January 12 and January 28).
- Bears want the October 29 high area to act as resistance.
- They want a strong breakout below the February 5 low and the 20-week EMA, followed by sustained follow-through selling and a measured move toward 6,500, based on the height of the 11-week trading range.
- Bears need consecutive strong bear bars closing far below the 20-week EMA to flip the market to Always In Short.
- If the market trades higher, they want weak follow-through buying to increase the odds of a failed breakout.
- Bulls see a large double bottom bull flag (December 17 and February 5).
- Bulls also see a High 4 buy setup.
- They need a strong breakout with sustained follow-through above the January 28 high to increase the odds of trend resumption, with a measured move target near 7,300 based on the height of the 11-week trading range.
- Bulls want the 20-week EMA to hold as support. If the market trades lower, they want the November 21 low to act as support.
- The market has been in a tight range for 11 weeks, indicating balance between bulls and bears as the bears’ strength has caught up with the prior bull trend.
- Bulls failed to trade above the high of prior bars in the last two weeks and have seen trending lower closes within the range.
- Traders may continue to Buy Low, Sell High (BLSH) within the range until there is a decisive breakout with sustained follow-through.
- Traders will watch whether bears can drive a strong breakout below the 11-week trading range with follow-through selling, or whether bulls can retest and break out to a new all-time high. If the market makes a new all-time high but lacks sustained follow-through buying, the odds of a failed breakout increase.
- Or will the market simply continue trading sideways around the October high area?
- Traders will likely wait for a strong breakout with sustained follow-through, either above the all-time high or below the 20-week EMA, before trading aggressively.
- The longer the market stalls around the October 29 high area without a strong breakout above, the higher the odds of a deeper pullback.
The Daily S&P 500 E-mini chart
- The market traded slightly higher early in the week. Tuesday and Wednesday gapped up but both reversed to close as bear bars. Thursday formed a large bear bar testing the 100-day EMA, followed by a doji on Friday.
- Last week, we said traders were watching whether the market would stall around the 20-day EMA and form a second leg sideways to down, or whether bulls could generate follow-through buying to new all-time highs.
- So far, the market is stalling near the all-time high area and the 20-day EMA.
- Bulls see a large double bottom bull flag (December 17 and February 5), a wedge bull flag (January 2, January 20, and February 5), and a small double bottom (February 5 and February 13).
- Bulls want a strong breakout above the January 28 high with sustained follow-through buying and a measured move target near 7,300, based on the height of the 11-week trading range.
- If the market trades lower, bulls want the November 21 low or the 200-day EMA to act as support.
- Bulls need consecutive strong bull bars to increase the odds of a successful breakout and trend resumption.
- Bears want the 20-day EMA to act as resistance.
- They want a strong breakout below the 11-week trading range, followed by a measured move toward 6,500, based on the height of that range.
- Bears need consecutive strong bear bars breaking below the December 17 low and the 100-day EMA to flip the market to Always In Short.
- If the market trades higher and makes a new all-time high, bears want weak follow-through buying to increase the odds of a failed breakout.
- The market remains in a trading range that began in late November. Bulls want a breakout above it; bears want a breakout below.
- Since late December, the candlesticks have formed an expanding triangle. This can act as either a reversal or continuation pattern, often trapping traders with failed breakouts before reversing.
- Over the past two weeks, there have been more prominent bear bars than bull bars, indicating increasing selling pressure which are cumulative.
- Traders are watching whether the market continues to stall around the 20-day EMA and the all-time high area. If it continues making slightly lower highs with more prominent bear bars, the odds of a downside breakout from the trading range increase.
- Alternatively, if bulls can create a breakout to new all-time highs, traders will watch for strong follow-through — without it, the odds of a failed breakout increase.
- Until there is a strong breakout with sustained follow-through in either direction, traders may continue to Buy Low, Sell High (BLSH), buying near the lower third and selling near the upper third of the range.
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