Market Overview: S&P 500 E-mini Futures
The market formed an E-mini spike and bull channel in the last 8 weeks. Bulls want any pullback to be weak and sideways, lacking follow-through, with overlapping candlesticks and prominent lower tails. Bears need to generate strong bear bars breaking below the minor bull trend line to indicate strength.
S&P500 E-mini futures
The Weekly S&P 500 E-mini chart
- This week formed a bull bar, closing in its upper half with a prominent tail below.
- Last week, we said traders would watch whether bulls could create more follow-through buying or whether the market would start to stall around the trend channel line area. There could be buyers below the first pullback from such a strong bull microchannel.
- The market formed a pullback early in the week but found buyers below the bull microchannel.
- Bulls have generated a strong rally in a spike and bull channel.
- 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).
- If the market forms a pullback following the breakout above the trend channel line, bulls want it to be weak and sideways, lacking follow-through, with overlapping candlesticks and prominent lower tails.
- Bulls want at least a small second leg sideways to up to retest the trend extreme high (currently May 14) following any pullback.
- If the market trades lower, bulls want the April 23 low (start of the bull channel) or the 20-week EMA to act as support.
- Bears view the move as a parabolic buy climax that is unsustainable without a sideways-to-down pullback.
- Bears want a failed breakout above the trend channel line within a few bars, followed by a test of the bull trend line.
- Bears want a two-legged sideways-to-down pullback lasting a few weeks.
- Bears need to generate strong bear bars breaking below the minor bull trend line 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.
- If the market trades higher, bears hope last week’s doji becomes the final flag of the rally.
- The market has rallied strongly over the past 8 weeks in a tight bull channel.
- The market remains Always In Long.
- While the move is strong, it has lasted a long time without a significant pullback, which is unsustainable and tends to attract profit-taking.
- However, strong momentum can sometimes last longer than traders expect.
- Traders will watch whether bulls can create more follow-through buying or whether the market starts to stall around the trend channel line area.
- 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.
- For now, the market may still be in the sideways-to-up phase, but the risk of a pullback from an overextended move is increasing.
- For now, any pullback would likely be minor.
The Daily S&P 500 E-mini chart
- The market traded slightly lower early in the week, followed by a retest of the trend extreme high on Friday, forming a lower high.
- Last week, 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 see a parabolic wedge top (May 1, May 11, and May 14) and a small double top (May 14 and May 22).
- 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 retest the start of the channel around the April 23 low area.
- Bears hope this week’s pullback, breaking a smaller minor bull trend line and followed by a retest of the prior high, can lead to a second leg sideways to down.
- The problem with the bears’ case is that they have not been able to create strong bear bars demonstrating strength.
- Bears need consecutive strong bear bars closing near their lows and breaking strongly below the bull trend line, followed by a weak retest of the trend extreme high, to create a credible setup.
- Bulls have 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 want a strong breakout above the trend channel line with sustained follow-through buying.
- If the market forms a larger pullback, bulls want it to be weak and sideways, with overlapping candlesticks and prominent lower tails, followed by at least a small sideways-to-up leg to retest the trend extreme high (now May 14).
- If the market forms a second leg down next week, bulls want it to stall around the May 19 high area, forming a double bottom bull flag.
- If the market trades lower, bulls want the 20-day EMA or the April 23 low to act as support.
- The market is Always In Long.
- The market has formed a spike and channel bull trend.
- The bull channel phase starting from the April 23 low is 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 market remains in the sideways-to-up phase, with an increasing risk of a two-legged minor pullback.
- While the market appears overextended and climactic, strong momentum can sometimes last much longer than traders expect.
- Traders will watch whether bulls can create more follow-through buying. If a pullback forms, traders will watch whether it is weak and sideways or strong, with consecutive bear bars closing near their lows.
- If the market trades higher, traders will watch for unusually large bull bars or a blow-off top.
- Traders will also watch whether the market forms a second leg sideways to down that stalls around the May 19 low area.
- For now, any pullback would likely be minor.
Trading room
Al Brooks and other presenters talk about the detailed E-mini price action real-time each day in the Brooks Trading Course trading room. We offer a 2 day free trial.
Market analysis reports archive
You can access all weekend reports on the Market Analysis page.
