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Weak Emini Follow-through Selling

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Market Overview: S&P 500 Emini Futures

The market formed weak Emini follow-through selling on the monthly chart. The bulls want February to break into new all-time highs followed by a measured move based on the height of the recent sideways trading range. If the market trades higher, they hope the recent sideways trading range will be the final flag of the rally.

S&P500 Emini futures

The Monthly Emini chart

Emini Monthly - No FT Selling, Final Flag Forming, Weak Emini Follow-through Selling
  • The January monthly Emini candlestick was a bull bar closing in its upper with a long tail below and a prominent tail above.
  • Last month, we said that traders would see if the bears could create a follow-through bear bar, or if the market would trade slightly lower but stall and close with a long tail below or a bull body (poor follow-through selling) instead.
  • The market traded lower in the first half of the month but reversed sideways to up from mid-month onwards. The bears did not get strong follow-through selling.
  • The bulls created a large wedge pattern (Mar 21, Jul 16 and Dec 6) and an embedded wedge (Aug 30, Oct 17, and Dec 6).
  • They want the market to continue in a broad bull channel for months.
  • They want any pullback to be sideways and shallow (filled with weak bear bars, bull bars, doji(s) and overlapping candlesticks) and form a higher low or a double bottom bull flag with the September 6 or August 5 lows. They want the pullback to have poor follow-through selling. So far, this is the case.
  • The bulls want February to break into new all-time highs followed by a measured move based on the height of the recent sideways trading range.
  • The bears want a reversal from a wedge pattern (Mar 21, Jul 16 and Dec 6).
  • They traded below the December low but could not create sustained follow-through selling.
  • If the market trades higher, they hope the recent sideways trading range will be the final flag of the rally.
  • They must create credible selling pressure (strong bear bars with follow-through selling) to show they are back in control.
  • Since January’s candlestick was a bull bar closing in its upper half, it can be a buy signal bar for February.
  • The move up since October 2023 has lasted a long time and is slightly climactic.
  • However, until the bears can create credible selling pressure, traders will not be willing to sell aggressively.
  • For now, traders will see if the bulls can create a breakout above the tight trading range and close February as a strong bull bar.
  • Or will the market continue to trade sideways within the trading range and breakout below instead?

The Weekly S&P 500 Emini chart

Emini Weekly - Bulls Want BO, Bears Want DT
  • This week’s Emini candlestick was a bull bar closing below the middle of its range with a prominent tail above.
  • Last week, we said the market may still trade a little higher. Traders would see if the bulls could create a follow-through bull bar breaking into new all-time territory, or if the market would stall around the December 6 high area instead.
  • The market gapped down on Monday followed by sideways to up trading. The weekly candlestick closed off its high following a pullback on Friday.
  • The bulls see the market as being in a broad bull channel and want the market to continue sideways to up for months.
  • They see the recent move (to Jan 13) as a two-legged pullback and want the market to resume higher from a double bottom bull flag (Nov 4 and Jan 13).
  • They want a breakout into new all-time highs followed by a measured move based on the height of the recent 19-week trading range.
  • They must continue to create sustained follow-through buying to increase the odds of a breakout into new all-time highs.
  • The bears got a two-legged pullback but the follow-through selling below the 20-week EMA was limited.
  • They see the current move as a retest of the prior trend extreme high (Dec 6) and a bull leg within the 19-week trading range.
  • They want a reversal from a double top (Dec 6 and Jan 24) and a lower high major trend reversal.
  • If the market trades higher, they want a failed breakout above the all-time high followed by a higher major trend reversal.
  • Since this week’s candlestick is a bull bar closing below the middle of its range, it can be a sell signal bar for next week albeit weak.
  • The market remains in a 19-week trading range. The December 6 high could be an area of resistance.
  • Traders buying here could be buying near the high of the 19-week trading range, which is not an ideal setup.
  • Traders may BLSH (Buy Low, Sell High) within the trading range until there is a breakout from either direction with follow-through buying/selling.
  • For now, traders will see if the bulls can create more follow-through buying breaking into new all-time territory.
  • Or will the market stall around the upper third of the trading range followed by a bear leg instead?

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