Market Overview: S&P 500 E-mini Futures
The market formed a S&P 500 E-mini tight trading range in the last 12 weeks. Bears 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 12-week trading range. Bulls need consecutive strong bull bars to increase the odds of a successful breakout above the January 28 high.
S&P500 E-mini futures
The Weekly S&P 500 E-mini chart
- This week’s E-mini candlestick was a bull bar closing near its high, with a prominent tail below.
- Last week, we said traders would watch whether bears could drive a strong breakout below the 11-week trading range with follow-through selling, or whether bulls could retest and break out to a new all-time high.
- The market traded slightly below the 20-week EMA, but follow-through was limited, and it reversed to close near the week’s high.
- 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 12-week trading range.
- So far, the market has attempted to break below the 20-week EMA in the last three weeks but has failed.
- 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, bears want a lower high relative to the January 28 high. They want a double top bear flag with the February 11 high.
- If the market makes a new all-time high, bears 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) and a micro wedge bull flag (January 20, February 5, and February 17).
- They see a High 1 buy setup following a test of the 20-week EMA.
- Bulls need consecutive strong bull bars to increase the odds of a successful breakout above the January 28 high.
- They want trend resumption with a measured move target near 7,300, based on the height of the 12-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 trading range for 12 weeks, indicating balance between bulls and bears as the bears’ strength has caught up with the prior bull trend.
- The market has made slightly lower highs over the past three weeks but has yet to break decisively below the 20-week EMA.
- 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 bulls can create a strong bull entry bar to retest and break out to a new all-time high. If the market makes a new high without sustained follow-through buying, the odds of a failed breakout increase.
- Or will the market trade higher, form a lower high, and close with a prominent tail above or a bear body?
- For now, given the repeated failures to break strongly below the 20-week EMA over the past three weeks, the market could trade slightly higher toward the top of the range.
- 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 it, the higher the odds of a deeper pullback.
- Can the market gap down and trade lower instead? Traders should be prepared for all possibilities, especially given recent weekend tariff developments that may increase volatility.
The Daily S&P 500 E-mini chart
- The market traded slightly lower early in the week, but follow-through selling was limited. It then traded sideways to up, testing the 20-day EMA, but has not broken decisively above it.
- Last week, we said traders were watching whether the market would continue to stall around the 20-day EMA and the all-time high area, forming slightly lower highs with more prominent bear bars, or whether bulls could break out to new all-time highs instead.
- Bulls see a large double bottom bull flag (December 17 and February 5) and a wedge bull flag (January 20, February 5, and February 17).
- 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 12-week trading range.
- Bulls need consecutive strong bull bars breaking far above the January 28 high to increase the odds of a successful breakout and trend resumption.
- Bulls want the 100-day EMA to act as support, which has held so far. If the market trades lower, they want the November 21 low or 200-day EMA to act as support.
- Bears want the 20-day EMA to act as resistance.
- They want a strong breakout below the 12-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, bears want the rally to lack follow-through buying, forming a lower high relative to the January 28 high and a double top bear flag with the February 11 high.
- If the market 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 and often traps traders with failed breakouts before reversing.
- More prominent bear bars have appeared in recent weeks, indicating increasing selling pressure which are cumulative.
- Traders are watching whether bulls can retest the January 28 high and break out to new all-time highs. If the market trades higher, traders will look for strong follow-through; without it, the odds of a failed breakout increase.
- Or whether the market forms a lower high relative to the January 28 high instead. If it continues making slightly lower highs with more prominent bear bars, weak bull bars, and prominent tails above, the odds of a downside breakout from the trading range 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.
- The longer the market stalls around the October 29 high area without a strong breakout above, the higher the odds of a deeper pullback.
- Can the market gap down and trade lower? Traders should be prepared for all possibilities, especially given recent weekend tariff developments that may increase volatility.
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