Market Overview: S&P 500 E-mini Futures
The market formed a weekly E-mini double bottom bull flag (January 2 and January 20). Bulls need a strong breakout above with sustained follow-through buying above the January 12 high to increase the odds of a trend resumption. Bears see the reversal up this week as a retest of the breakout point (prior week’s low) and the prior bull trend line. They want the move to form a lower 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 long tail below.
- Last week, we said traders would watch whether bulls could produce further follow-through buying to new all-time highs or whether the market would continue to trade sideways near the October 29 high.
- The market gapped down on Tuesday, testing the 20-week EMA, but lacked follow-through selling, reversing to retest last week’s low.
- Bears see three pushes up (December 11, December 26, and January 12), forming a wedge top and a double top (October 29 and January 12).
- Bears want the October 29 high area to act as resistance. If the market trades higher, they hope follow-through buying will be weak, resulting in a failed breakout.
- Bears see the reversal up this week as a retest of the breakout point (prior week’s low) and the prior bull trend line. They want the move to form a lower high.
- Bears want a breakout pullback short setup, but this week’s reversal bar is not a strong sell signal bar.
- Bears need consecutive strong bear bars breaking well below the 20-week EMA to show control.
- Bulls see this week as a pullback forming a larger double bottom bull flag (December 17 and January 20) and a larger wedge bull flag (November 21, December 17, and January 20).
- They want a failed breakout below the ascending triangle and the recent tight trading range.
- Bulls want the 20-week EMA to act as support.
- They need a strong breakout above with sustained follow-through buying above the January 12 high to increase the odds of a trend resumption, with a measured move target near 7,400 based on the height of the recent trading range.
- The market broke below the recent tight trading range, but follow-through selling was limited.
- Buying pressure since the November 21 low has been slightly stronger, with bull bars closing near their highs, than selling pressure, which has shown limited follow-through and prominent lower tails.
- Since this week is a bull bar closing near its high, the market could still trade at least a little higher.
- A surprise, and therefore lower-probability, outcome would be a gap down at the open followed by continued selling. Lower probability does not mean zero, and traders should be prepared for all outcomes.
- For now, traders will watch whether bulls can produce further follow-through buying to new all-time highs.
- Or whether the market continues to stall around the October 29 high area, followed by more bear bars in the weeks ahead.
- Until bears produce consecutive strong bear bars, traders are unlikely to sell aggressively.
The Daily S&P 500 E-mini chart
- The market gapped down on Tuesday and closed as a bear bar near its low. The move lacked follow-through selling, and the market reversed higher, closing around the 20-day EMA.
- Last week, we said traders were watching whether bulls could produce further follow-through buying to new all-time highs or whether the market would continue to stall near the October 29 high.
- Bulls see this week as a pullback forming a larger double bottom bull flag (December 17 and January 20) and a larger wedge bull flag (November 21, December 17, and January 20).
- They want a failed breakout below the ascending triangle and the recent tight trading range.
- Bulls want a strong breakout above with sustained follow-through buying and a measured move target around 7,400, based on the height of the recent trading range.
- Bulls need consecutive strong bull bars to increase the odds of a successful breakout above the January 12 high.
- If the market trades lower, bulls want the 100-day EMA or the 200-day EMA to act as support.
- Bears see the January 12 rally as a retest of the prior trend extreme high (October 29).
- They want the market to reverse from a wedge top (December 11, December 26, and January 12) and a double top (October 29 and January 12).
- They see the pullback on Thursday (January 22) as a retest of the breakout point (January 14) and the prior bull trend line.
- Bears want the market to form a lower high major trend reversal and a breakout pullback short setup, followed by a second leg sideways to down.
- Bears need consecutive strong bear bars closing near their lows and breaking well below the December 17 low to show control.
- If the market trades higher and makes a new all-time high, bears hope follow-through buying will be weak, leading to a failed breakout.
- Pullbacks since the November 21 low have continued to form higher lows, including this week (December 17 and January 20).
- The market remains in a small trading range that began near the end of November. Bulls want a breakout above, while bears want a breakout below the range.
- Traders are watching whether bulls can produce further follow-through buying to new all-time highs.
- Or whether the market stalls around the 20-day EMA, followed by a second leg sideways to down instead.
- Traders will wait for a strong breakout with sustained follow-through above or below the trading range before trading aggressively.
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.
