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Emini 4-Bar Bull Microchannel

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Market Overview: S&P 500 Emini Futures

The market formed a S&P 500 Emini 4-bar bull microchannel on the monthly chart. The bulls expect at least a small second leg sideways to up after any pullback. The bears must create strong bear bars to show they are back in control.

S&P500 Emini futures

The Monthly Emini chart

Emini Monthly - Bulls Need FT Buying, Bears Want Pullback, Emini 4-Bar Bull Microchannel
  • The July monthly Emini candlestick was a bull bar closing in its upper half with a prominent tail above.
  • Last month, we said traders would see if the bulls could create a strong breakout above the December 6 high, or if the market would trade higher, but close with a long tail above or a bear body instead.
  • The market traded sideways to up for most of the month, followed by a small pullback in the last few days of July. The August candlestick gapped lower at the open.
  • The bulls got a breakout above the prior all-time high (Dec 6) in July.
  • They want the broad bull channel to resume.
  • The move up (from Apr 7 low) is in the form of a 4-bar bull microchannel. They may be buyers below the first pullback.
  • Because of the strong move up, the bulls expect at least a small second leg sideways to up after any pullback.
  • The bears see the current move as a buy vacuum retest of the prior all-time high (Dec 6).
  • They want a higher high major trend reversal and a double top (Dec 6 and Jul 31)
  • They want a failed breakout above the December 6 high.
  • The bears must create strong bear bars to show they are back in control.
  • So far, the move up from the April 7 low is strong, in the form of a 4-bar bull microchannel and consecutive bull bars closing near their highs.
  • The market is Always In Long.
  • The move covered 32% from low to high (Apr 7 to July 31) over 4 months without any significant pullback.
  • While the move is strong, it is slightly climactic and overbought.
  • The market may form a pullback to alleviate the overbought condition before the trend resumes.
  • If a pullback forms, it could last 1 to 2 months.
  • The 4-bar bull microchannel increases the odds that the first pullback may only be minor, followed by a retest of the recent leg extreme high (Jul 31 ) after the pullback.
  • For now, traders will see if the bears can create strong bear bars to show they are back in control.
  • Or will the pullback lack follow-through selling, forming a long tail or a bull body in August instead?

The Weekly S&P 500 Emini chart

Emini Weekly - Bulls Want Weak PB, Bears Want TBTL
  • This week’s Emini candlestick was an outside bear bar closing near its low.
  • Last week, we said traders would see if the bulls could develop more follow-through buying above the December 6 high, or if the market would trade slightly higher but close with long tails or bear bodies in the weeks ahead instead.
  • The market formed a new all-time high, but the follow-through buying was limited and reversed to close below the December 6 high.
  • The bulls want a resumption of the bull trend.
  • They see the current move as a pullback and want the July low or the 20-week EMA to act as support.
  • They want the pullback to be weak with poor follow-through selling (overlapping ranges, bull bars, long tails below candlesticks).
  • They want at least a small sideways to up leg to retest the July 31 high, even if it only forms a lower high.
  • The bears hope the recent 3-week small trading range will be the final flag of the move.
  • They want a reversal from a higher high major trend reversal and a failed breakout above the prior all-time high (Dec 6).
  • At the least, they want a TBTL (Ten Bars, Two Legs) pullback lasting many weeks.
  • If the market trades higher, they want it to stall below the July 31 high, forming a lower high major trend reversal.
  • They must create strong follow-through selling following the outside bear bar to show they are back in control (something they couldn’t do since the April 7 low).
  • So far, the move up since the April 21 low is in a tight bull channel, indicating strong bullish momentum.
  • The move covered 32% in 4 months.
  • While strong, the move has lasted a long time without any significant pullback. It is slightly climactic and overbought.
  • The market may form a pullback before the trend resumes again. The pullback phase testing near the 20-week EMA may be underway.
  • Since this week’s candlestick was an outside bear bar closing near its low, it can be a sell signal bar for next week.
  • The market can gap down on Monday. Small gaps usually close early.
  • Sometimes, the candlestick after an outside bar can be an inside bar, forming an ioi (inside-outside-inside) breakout mode pattern.
  • For now, traders will see if the bears can create follow-through selling, something they couldn’t do previously (since the April low).
  • Or will the market form a retest of the July 31 high instead?

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