S&P 500 E-Mini: Climactic Reversal in the Cards?

S&P 500 Emini futures

The Monthly Emini chart

Emini Monthly: Close below 20-Month EMA, Weak Bear Bar

• The October monthly Emini candlestick was a bear bar with long tails above and below.
• Last month, we said that the Emini may still trade at least a little lower and traders will see if the bears can create follow-through selling closing below the 20-month EMA.
• October traded lower and closed below the 20-month EMA. However, the long tail below the candlestick indicates that the bears are not as strong as they would like to be.
• The bears see the prior rally (Jul 27) as a retest of the all-time high and want a reversal from a lower high major trend reversal.
• They got 3 consecutive bear bars, something that has not happened since the January 2020 selloff. The last time the Emini formed 4 consecutive bear bars was in the year 2011. Can the bears create another consecutive bear bar?
• The bears will need to create follow-through selling closing far below the 20-month EMA to increase the odds of a reversal down.
• Previously, the bulls managed to create a tight bull channel from March to July.
• That increases the odds of at least a small second leg sideways to up after the recent pullback.
• They see the pullback from August to October simply as a 50% pullback of the whole rally which started in October 2022.
• They want the market to reverse up from a trend channel line overshoot (Oct) and a higher low, retesting the July 27 high followed by a breakout above.
• So far, November started with strength and is currently an inside bull bar.
• If November closes as a bull bar near its high and above October’s high, that will increase the odds of the bull trend resuming.
• The bears want November to close with a long tail above and a bear body.
• For now, the bull trend remains intact (higher highs, higher lows).

The Weekly S&P 500 Emini chart

Emini Weekly: Climactic Reversal, Bulls Need FT, Emini Climactic Reversal

• This week’s Emini candlestick was a big bull bar closing near its high.
• Last week, we said that the odds slightly favor the market to trade at least a little lower. Traders will see if the bears can get another strong bear bar, or will the market trade slightly lower, but closes with a long tail or a bull body.
• This week gapped higher and traded up with strength, testing the 20-week EMA.
• The bulls see the move down (from July 27) as a deep pullback of the whole move up which started in October 2022.
• They want a reversal from a wedge bull flag (Aug 18, Oct 3, and Oct 27) and a trend channel line overshoot. They got what they wanted.
• The market took 3 months to fall 10% into correction territory but recovered almost 6% of the whole move in only 5 days this week.
• The bulls see the big bull bar this week as evidence of bears taking profit aggressively, believing that the whole move down was simply a wedge bull flag.
• They will need to create follow-through buying next week, closing above the 20-week EMA.
• If they get a couple of strong consecutive bull bars, the odds of the bull trend resuming will increase.
• If the market trades slightly lower, they want a second leg up and a reversal up from a higher low major trend reversal.
• The bears got the third leg down forming the wedge pattern (Aug 18, Oct 3, and Oct 27).
• They want a strong breakout below the bull trend line with follow-through selling.
• However, they did not get sustained follow-through selling, and the market reversed up with strength instead.
• The bears see the strong rally this week simply as a 50% pullback and hope to get another leg down to retest the October low after the current pullback.
• They want the 20-week EMA or the October high to act as resistance.
• Since this week’s candlestick is a big bull bar closing near its high, it is a buy signal bar for next week.
• The market may gap up on Monday. Small gaps usually close early.
• Odds slightly favor the market to trade at least a little higher.
• Traders will see if the bulls can get a follow-through bull bar closing above the 20-week EMA and the October high. If they get that, the odds of the bull trend resuming will increase.
• Or will the market trade slightly higher but stall around the 20-week EMA or the October high and close with a long tail above or with a bear body?
• While the market can still trade sideways to down for a couple more weeks, the bull trend remains intact; higher highs, higher lows. This remains true.