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E-mini 4-Bar Bull Microchannel

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Market Overview: S&P 500 E-mini Futures

The market is forming a S&P 500 E-mini 4-bar bull microchannel on the weekly chart. The bulls want any pullback to be weak and sideways (overlapping and long tails below candlesticks, weak bear bars). The bears want a reversal from a wedge pattern (May 19, Jul 31, and Sep 22) and a buy climax.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

E-mini Weekly - 4-Bar Bull MC, Bears Want PB, E-mini 4-Bar Bull Microchannel
  • This week’s E-mini candlestick was a bear doji closing around the middle of its range with prominent tails.
  • Last week, we said traders would observe whether the bulls could create follow-through buying and make new highs, or if the market would trade slightly higher but start forming prominent tails above candlesticks or bear bars instead.
  • The market made a new all-time high early in the week, followed by a pullback. However, the move did not break below last week’s low and reversed to close off the week’s low.
  • The bulls got 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 next targets for the bulls are the 6800 and 6900 levels.
  • They want any pullback to be weak and sideways (overlapping and long tails below candlesticks, weak bear bars).
  • They expect at least a small second leg sideways to up to retest the current leg extreme high (now Sep 22), even if it only forms a lower high.
  • The bears want a reversal from a wedge pattern (May 19, Jul 31, and Sep 22) and a buy climax.
  • They hope that the recent sideways trading range (in Aug) 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.
  • The move since the September 2 low is in a 4-bar bull microchannel, indicating persistent buying activity. There could be buyers below the first pullback.
  • For now, traders will see if the bears can create follow-through selling, something they couldn’t do since the April low.
  • Or will the market continue to trade sideways to up instead?

The Daily S&P 500 E-mini chart

E-mini Daily - Tight Bull Channel, Small PB, Bears Want TBTL
  • The market made a new high early in the week, followed by a pullback testing the 20-day EMA. Friday traded higher, closing as a small bull bar near its high.
  • Last week, we said the market may still trade at least a little higher. Traders would observe whether the bulls could create more follow-through buying, or if the market would trade slightly higher but start to stall, forming long tails above candlesticks or bear bars instead.
  • The bulls created the third leg sideways to up, forming a larger wedge pattern (May 19, Jul 31, and Sep 22).
  • They see the current move (Sep 25) simply as a pullback.
  • They want the 20-day EMA or the bull trend line to act as support. They want an endless small pullback bull trend.
  • They want a retest of the September 22 high, followed by a strong breakout above.
  • The next targets for the bulls are the 6800 and 6900 levels.
  • The bears want a reversal from a large wedge pattern (May 19, Jul 31, and Sep 22) and a buy climax.
  • They hope the recent sideways trading range (in Aug) will be the final flag of the move.
  • They view Friday’s move as a small retest of the prior trend extreme high (Sep 22) and want it to form a lower high or a small double top.
  • 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.
  • Traders will observe whether the bulls can create a strong retest of the September 22 high, followed by a strong breakout above.
  • Or will the market form a lower high (vs Sep 22), followed by a second leg sideways to down instead?
  • For now, the pullback may only be minor.

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