S&P E-mini Likely to Trade Higher

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The S&P 500 E-mini moved up from the October low is in a tight bull channel up on weekly chart. It also has 3 pushes therefore a wedge bear flag. Since the October low, the bull bars are big closing near their highs, while the bear bars had no follow-through selling. That means strong buying pressure. The bulls need to create strong consecutive bull bars closing near their highs breaking far above the major bear trend line to signal the end of the correction.

S&P 500 E-mini futures

Emini Weekly Chart

• This week’s Emini candlestick was a bull bar closing near its high.
• Last week, we said that odds slightly favor at least a small second leg sideways to up after a pullback.
• The bulls got a reversal higher from a wedge bottom (Feb 24, June 17 and Oct 13) with a nested wedge (Sept 6, Sept 30 and Oct 13).
• They then got a second leg sideways to up from a higher low major trend reversal (Nov 3).
• While the move up from October low is in a tight bull channel up, there is a lot of overlapping price action.
• That means the bulls are not as strong as they would like to be.
• The problem with the bull’s case is that the selloff from August was very strong. The sideways to up leg may lead to a lower high. For now, this remains true.
• The bulls need to create strong consecutive bull bars closing near their highs breaking far above the major bear trend line to signal the end of the correction.
• Since this week was a bull bar closing near the high, it is a good buy signal bar for next week.
• The E-mini may gap up on Monday. However, small gaps usually close early.
• The bears got a tight bear channel down testing the June low but failed to get follow-through selling.
• The bears hope that the current pullback is simply forming a wedge bear flag (Oct 5, Oct 28, and Nov 15) or a double top bear flag (Sept 12) and a lower high.
• Since the October low, the bull bars are big closing near their highs, while the bear bars had no follow-through selling. That means strong buying pressure.
• The bears will need at least a strong reversal bar or a micro double top before they would be willing to sell more aggressively.
• They want a retest of the October low followed by a strong breakout and a measured move down to around 3450 or the 3400 Big Round Number which is also 2020 high.
• Bears see the selloff from January as a broad bear channel. The major bear trend line remains as resistance above.
• For now, odds slightly favor the E-mini to trade at least a little higher.
• Traders will see if the bulls can get a follow-through bull bar next week or if next week trades higher first but reverses into a bear bar.

Emini Daily Chart

• The E-mini traded slightly lower on Monday and closed as a doji bar followed by sideways to up for the rest of the week.
• Last week, we said that odds slightly favor at least a small second leg sideways to up after the current pullback.
• Bulls see the strong selloff from August simply as a sell vacuum testing June low within a broad bear channel. A broad bear channel is almost a trading range that is tilted down.
• They got a reversal higher from a lower low major trend reversal with the June low, a wedge bull flag (Feb 24, June 17, and Oct 13) and a nested wedge (Sept 6, Sept 30 and Oct 13).
• They then got the second leg sideways to up from a higher low major trend reversal (Nov 3).
• This week, the bulls retested the Nov 15 high. The next targets for the bulls are the Sept 12 high, the Aug 26 high and the major bear trend line.
• The problem with the bull’s case is that the selloff from Aug 16 was very strong. The current sideways to up pullbacks may lead to a lower high. For now, this remains true.
• The move up from October had a lot of overlapping price action. The bulls are not yet as strong as they would like to be.
• The bulls need to create consecutive bull bars closing near their highs (strong spike up) and trading far above the major bear trend line, to convince traders that a reversal higher is underway.
• The bears want a reversal down from a wedge bear flag (Oct 5 or 18, Nov 1 and Nov 15) and a small double top with Nov 15 high.
• They also want a reversal lower from a lower high around the major bear trend line and a larger double top bear flag with Sept 12.
• Bears see the selloff from January as a broad bear channel and want a retest of the October low followed by a strong breakout and a measured move down to 3450, or slightly lower around the 3400 big round number which is also 2020 high.
• They will need to create consecutive strong bear bars closing near their lows (similar to August) to increase the odds of a reversal down.
• For now, odds slightly favor the E-mini to trade at least a little higher.
• The wedge bear flag and double top increase the odds that we may see a deeper pullback within 1 to 3 weeks.

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