The market formed a 6-bar E-mini bull microchannel on the monthly chart. The next targets for the bulls are the 6900 and 7000 levels. If there is a pullback, they hope to get at least a small second leg sideways to up to retest the trend extreme high (now Oct 3). The bears want a reversal from a higher high major trend reversal and large wedge pattern (Jul 27, Dec 6, and Oct 3).
S&P500 E-mini futures
The Monthly E-mini chart
- The September monthly E-mini candlestick was a big bull bar closing near its high.
- Last month, we said traders would observe whether the bull could create more follow-through buying, or if the bears would be able to create some decent selling pressure (bear bars), something they had not done since the April low.
- The market gapped down early in the month but lacked follow-through selling. The E-mini then traded sideways to up for the month, reaching a new all-time high.
- The bulls created a resumption of the trend in the form of a 6-bar bull microchannel. That means persistent buying.
- They reached the 6800-level target on Friday (Oct 3). The next targets for the bulls are the 6900 and 7000 levels.
- If there is a pullback, they hope to get at least a small second leg sideways to up to retest the trend extreme high (now Oct 3).
- The bears want a reversal from a higher high major trend reversal and large wedge pattern (Jul 27, Dec 6, and Oct 3).
- The problem with the bear’s case is that they haven’t been able to create strong bear bars with follow-through selling.
- They need to create consecutive bear bars closing near their lows to indicate they are back in control.
- So far, the move up from the April 7 low is strong, in the form of a 6-bar bull microchannel and consecutive bull bars closing near their highs.
- The market is Always In Long.
- While the move appears slightly climactic and overbought, traders will only be willing to sell aggressively when they see the bears can create strong bear bars with sustained follow-through selling.
- The 6-bar bull microchannel increases the odds that there may be buyers below the first pullback.
- Since September is a bull bar closing near its high, the odds slightly favor October to trade at least a little higher, which it has done.
- Traders will see if the bull can create more follow-through buying, closing October as a strong bull bar.
- Or will the market trade slightly higher, but start forming long tails above candlesticks, or candlesticks with bear bodies (something they haven’t been able to do since the April low) instead?
The Weekly S&P 500 E-mini chart
- This week’s E-mini candlestick was a bull bar closing in its upper half with prominent tails.
- Last week, we said traders would observe whether the bears could create follow-through selling (something they had not done since the April low), or if the market would continue to trade sideways to up instead.
- So far, the market has continued to trade sideways to up, and the bears haven’t been able to create credible selling pressure.
- The bulls got a 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).
- They reached the 6800-level target on Friday (Oct 3). The next targets for the bulls are the 6900 and 7000 levels.
- If there is a pullback, they hope to get at least a small second leg sideways to up to retest the trend leg extreme high (now Oct 3).
- The bears want a reversal from a wedge pattern (May 19, Jul 31, and Oct 3) and a buy climax.
- 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.
- The move since the September 2 low is in a 5-bar bull microchannel, indicating persistent buying activity. There could be buyers below the first pullback.
- Due to the climactic nature of the move, buying at current levels is becoming increasingly risky. While the market can still trade slightly higher, the risk of a two-legged minor pullback is increasing.
- For now, traders will see if the bulls can create more follow-through buying.
- Or will the market stall around the 6800 round number area, followed by a pullback in the weeks ahead instead?
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