E-mini's 13-day bull micro channel, as well as its 13 consecutive bull bars, ended Wednesday of last week when it traded below Tuesday’s low.
That streak was the longest its ever had since February 2011. In 2011, while the E-mini traded higher the following month, it was down 24% eight months later.
The chart below shows the 2011 streak of 15 consecutive bull days:
Although similar patterns often have similar follow-through, the price action is rarely identical. The important points are that when there is an extreme buy climax, there is an increased chance of a deeper correction, and of a correction that lasts longer than recent pullbacks. The current streak should lead to a 5 to 10% pullback beginning within a month. There is no top yet, and the bulls are continuing to buy.
There were two bear bars last week, which was a sign that bulls were starting to take some profits.
Once the buy climax ends, the E-mini will have a difficult time going much above that high for the next several months, and possibly for the rest of the year.
Because the bull channel is tight, bulls will buy the 1st reversal down, even if it is 10%. They know even a strong reversal down has only a 30% chance of growing into a bear trend without first testing the high. Once the trend tests the old high, then the bears have a 40% chance of a major reversal, like in the summer of 2011.