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E-mini Pullback to the 20-Week EMA

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Market Overview: S&P 500 E-mini Futures

The market formed a S&P 500 E-mini pullback to the 20-week EMA. Bears will need consecutive bear bars closing near their lows and breaking far below the 20-week EMA to show they are firmly in control. Bulls want the October 10 low and the 20-week EMA to act as support.

S&P500 E-mini futures

The Weekly S&P 500 E-mini chart

E-mini Weekly - Test 20-Week EMA, Bulls Want Retest High, E-mini Pullback to the 20-Week EMA
  • This week’s E-mini candlestick was a bear bar closing in its lower half with a prominent tail below.
  • Last week, we said traders would watch whether bears could finally create strong follow-through selling — something they haven’t managed since April — or if the pullback would continue to lack follow-through (overlapping bars).
  • Bears produced a follow-through bear bar testing the 20-week EMA. It is the first streak of four consecutive bear bodies since February.
  • They want a reversal from a wedge top (May 19, Jul 31, Oct 29).
  • They see the 6-week trading range as a final flag in the rally and want a pullback to the October 10 low area or the 20-week EMA. They achieved that this week.
  • They are looking for a TBTL (Ten Bars, Two Legs) pullback lasting several weeks.
  • If the market trades higher, they want it to form a lower high major trend reversal, followed by a second leg sideways to down.
  • Bears will need consecutive bear bars closing near their lows and breaking far below the 20-week EMA to show they are firmly in control.
  • Bulls see the current move as a pullback. They want the October 10 low and the 20-week EMA to act as support.
  • They want a retest and breakout above the October 29 high, followed by a resumption of the bull trend from a double bottom bull flag (Oct 10 and Nov 21).
  • The move up since the April 21 low has been a tight bull channel, reflecting persistent buying pressure.
  • The rally is slightly climactic and overbought; it may need a pullback before continuing higher. That pullback is underway.
  • If the market trades higher, traders will watch the strength of the move. If it is weak — overlapping bars, long tails above bars, dojis — and forms a lower high, the odds of a second leg sideways to down from a lower high major trend reversal will increase.
  • For now, traders will watch whether bears can create stronger follow-through selling and push price below the 20-week EMA.
  • Or will the pullback stall around the 20-week EMA, followed by a retest of the October 29 high instead?
  • At the moment, odds slightly favor the pullback being minor.

The Daily S&P 500 E-mini chart

E-mini Daily - Large DB Bull Flag, Bears Need Strong FT Selling
  • The market traded slightly lower early in the week, but follow-through selling was limited. On Thursday, it gapped up and tested the 20-day EMA but reversed into a big outside bear bar closing near its low. Friday dipped slightly lower but reversed into a bull bar with prominent tails.
  • Last week, we said traders would watch whether bears could create more follow-through selling. If the market traded higher, we noted they would watch for the move to stall around the November 12 high and form a double top bear flag, followed by another sideways-to-down leg.
  • Bulls see the current move as a pullback within the bull trend and want it to remain weak and sideways — overlapping bars, dojis, long lower tails, and poor bear follow-through.
  • They hope the pullback has relieved the recent overbought conditions.
  • Bulls want the October 10 low and the 100-day EMA to act as support. If the market trades lower, they want the 200-day EMA to hold.
  • They want a retest and breakout above the October 29 high, followed by a continuation of the trend from a wedge bull flag (Nov 7, Nov 18, Nov 21) and a large double bottom bull flag (Nov 7 and Nov 21).
  • Bulls must create strong consecutive bull bars trading above the 20-day EMA to show they are taking back control.
  • Bears want a reversal from the large wedge pattern (May 19, Jul 31, Oct 29) and a lower-high major trend reversal (Nov 12).
  • If the market trades higher, bears want it to stall around the 20-day EMA or the November 12 high, forming a larger double top bear flag.
  • They must produce strong consecutive bear bars closing near their lows and pushing far below the 20-day EMA and the October 10 low to signal that they are decisively in control.
  • Since September, the market has made new all-time highs but with more overlapping ranges — a sign of increasing two-sided trading and loss of momentum.
  • Traders will watch whether bears can create more follow-through selling. If the market trades higher, they will watch for the move to stall around the 20-day EMA or the November 12 high and form a larger double top bear flag, followed by another sideways-to-down leg.
  • Or will bulls generate a strong retest of the all-time high instead?
  • For now, odds slightly favor the pullback being minor.

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