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E-mini Third Leg Up

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Market Overview: S&P 500 E-mini Futures

The market is forming an S&P 500 E-mini third leg up. The bulls want a Leg 1 = Leg 2 move, which will take the market to the 6800 area (Leg 1 being the Apr 21 low to the May 19 high). The bears must create consecutive bear bars closing near their lows to show they are back in control.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

E-mini Weekly - No FT Selling, 3rd Leg Up, E-mini Third Leg Up
  • This week’s E-mini candlestick was a bull bar closing near its high and in new all-time high territory.
  • Last week, we said traders would observe if the bulls could create more follow-through buying and make new highs, or if the market would continue to stall around the 6500 area instead.
  • The market formed a breakout above the 6500 level to test the 6600 area this week.
  • The bulls view the recent moves (Aug 1, Aug 20, and Sep 2) as pullbacks and want a resumption of the bull trend.
  • They want a Leg 1 = Leg 2 move, which will take the market to the 6800 area (Leg 1 being the Apr 21 low to the May 19 high).
  • They want another strong leg up from a wedge bull flag (Aug 1, Aug 20, and Sept 2) or a double bottom bull flag (Aug 1 and Sep 2). The move is underway.
  • They must continue to create strong follow-through buying to increase the odds of reaching the measured move.
  • The bears want a reversal from a wedge pattern (May 19, Jul 3, and Sep 12).
  • They want a TBTL (Ten Bars, Two Legs) pullback lasting a few weeks.
  • They hope that the recent sideways trading range will be the final flag of the move.
  • 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 buying pressure is stronger (bull bars with follow-through buying) compared to weaker selling pressure (bear bars with no follow-through selling).
  • While the move is slightly climactic and overbought, the bears need to do more by creating strong consecutive bear bars to show they are back in control.
  • Without that, traders will not be willing to sell aggressively.
  • Since this week’s candlestick closed near its high, the market may gap up next week. Small gaps usually close early.
  • The market may still trade sideways to up.
  • For now, traders will see if the bulls can create follow-through buying and make new highs.
  • Or will the market trade slightly higher but start forming prominent tails above candlesticks or bear bars, something the bears couldn’t do since the April low?

The Daily S&P 500 E-mini chart

E-mini Daily - Still No FT Selling, 3rd Leg Up, Bulls Need FT
  • The market traded sideways to up, making a new all-time high this week.
  • Last week, we said traders would observe if the bulls could create more follow-through buying and another strong leg up, or if the market would continue to stall around the 6500 area instead.
  • The bulls want a measured move (a Leg 1 = Leg 2 move will take the market to the 6800 area – leg 1 being the Apr 21 low to the May 19 high).
  • They want the third leg sideways to up to form the larger wedge pattern with the first two legs being May 19 and July 31 highs. The move is underway.
  • They see the recent pullbacks forming a wedge bull flag (Aug 1, Aug 20, and Sep 2).
  • They must continue to create more follow-through buying to increase the odds of reaching the measured move.
  • They want the 20-day EMA or the bull trend line to act as support.
  • The bears want a reversal from a large wedge pattern (May 19, Jul 31, and Sep 13) and an embedded wedge (Aug 13, Aug 28, and Sep 13).
  • They hope the recent sideways trading range will be the final flag of the move.
  • 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.
  • The move from the April 21 low is trading in a tight bull channel, indicating strong buying momentum.
  • The buying pressure remains slightly stronger (consecutive bull bars, tight bull channels) compared to the weaker selling pressure (weak and sideways pullbacks with limited follow-through selling).
  • While the market appears to be overbought and climactic, until the bears can create strong consecutive bear bars to show they are back in control, traders will not be willing to sell aggressively.
  • For now, the market remains in the sideways to up phase.
  • Traders will see if the bulls can create follow-through buying in the weeks ahead.
  • Or will the bears be able to create decent selling pressure (sustained follow-through selling below 20-day EMA), something that they couldn’t do since the April 21 low?

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