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E-mini Bears Need Follow-through Selling

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Market Overview: S&P 500 E-mini Futures

The S&P 500 E-mini bears need follow-through selling on the weekly chart, something they couldn’t do since the April low. If the market trades lower, the bulls want the 20-week EMA or the September 2 low area to act as support.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

E-mini Weekly - Large Wedge, Climactic & Overbought, E-mini Bears Need Follow-through Selling
  • This week’s E-mini candlestick was a big outside bear bar closing near its low.
  • Last week, we said buying at current levels is becoming increasingly risky. While the market could still trade slightly higher, the risk of a two-legged minor pullback is increasing.
  • The market made a new all-time high on Thursday but reversed sharply lower on Friday.
  • The bulls reached the 6800-level target in October.
  • They view the current move as a pullback and hope the September 25 low area will act as support.
  • If the market trades lower, they want the 20-week EMA or the September 2 low area to act as support.
  • They hope to get at least a small sideways to up leg to retest the trend extreme high (Oct 9), even if it only forms a lower high.
  • The bears want a reversal from a wedge pattern (May 19, Jul 31, and Oct 9) and a buy climax.
  • The next target for the bears is the 20-week EMA.
  • The problem with the bear’s case is that they could not create sustained follow-through selling on the weekly chart since the April 7 low.
  • They must create consecutive bear bars closing near their lows to show they are back in control.
  • The move up since the April 21 low is in a tight bull channel, indicating strong bullish momentum.
  • The move is slightly climactic and overbought. The market may need to form a TBTL (Ten Bars, Two Legs) pullback before attempting to resume the trend.
  • The bears need to do more by creating strong consecutive bear bars to show they are back in control.
  • The move from the September 2 low was in a 5-bar bull microchannel, indicating persistent buying activity.
  • There could be buyers below the first pullback attempting a reversal (even if it only forms a lower high).
  • However, due to the climactic nature of the move, buying at current levels is increasingly risky. The risk of a two-legged minor pullback is increasing. It may have begun this week.
  • Since this week’s candlestick is a bear bar closing near its low, it is a sell signal bar for next week.
  • The market could gap down next week. Small gaps usually close early.
  • The market may still trade at least a little lower.
  • For now, traders will see if the bears can create a follow-through bear bar, something they couldn’t do since the April low. If they can, the odds of a 2-legged pullback would increase.
  • Or will the market lack follow-through selling again?

The Daily S&P 500 E-mini chart

E-mini Daily - Wedge, Embedded Wedge, Bears Want PB
  • The market traded slightly sideways to up, making a new all-time high on Thursday but closing as a bear bar. Friday formed a big bear bar closing below the 20-day EMA.
  • Previously, we said traders would observe whether the bulls could create a strong retest of the September 22 high, followed by a strong breakout above, or if the market would form a lower high (vs Sep 22), followed by a second leg sideways to down instead.
  • The market traded slightly above the September 22 high but stalled there, reversing lower this week.
  • The bulls created the third leg sideways to up, forming a large wedge pattern (May 19, Jul 31, and Oct 9).
  • They reached the 6800-level measured move and round number target in October.
  • They see the current move as a pullback.
  • If the market trades lower, they want the September 2 low or the 100-day or 200-day EMA area to act as support, forming a major higher low.
  • They want a retest of the October 9 high, even if it only forms a lower high.
  • The bears want a reversal from a large wedge pattern (May 19, Jul 31, and Oct 9) and an embedded wedge (Aug 13, Sept 22, and Oct 9).
  • They want a TBTL (Ten Bars, Two Legs) pullback lasting a few weeks.
  • The next targets for the bears are the 100-day EMA and the 200-day EMA.
  • They must create consecutive bear bars closing near their lows, trading far below the 20-day EMA and the bull trend line, indicating they are back in control.
  • If the market trades higher, they want the 20-day EMA to act as resistance, forming a lower high and a small double top (vs Oct 9).
  • The move from the April 21 low is trading in a tight bull channel, indicating strong buying momentum.
  • The market is slightly overbought and climactic. It may need to form a two- or three-legged pullback to alleviate the overbought condition before resuming the trend.
  • The bears must create strong follow-through selling to demonstrate they are back in control, something they have been unable to do since the April 21 low.
  • For now, traders will observe whether the bears can create sustained follow-through selling.
  • Or will the market trade slightly lower, but stall and form a retest of the October 9 high (even if it only forms a lower high) instead?

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