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S&P 500 E-Mini Forms a 6-Bar Bull Micro Channel: What Comes Next?

Published 04/01/2024, 08:11 AM
ESM24
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Market Overview: S&P 500 Emini Futures

The monthly chart formed an S&P Emini 6-bar bull micro channel which means strong bulls. Odds slightly favor buyers below the first pullback. The bears want a failed breakout above the all-time high and a reversal from a higher high major trend reversal. While a minor pullback can come at any moment, trying to pick a top is a low-probability strategy.

S&P 500 Emini Futures

S&P 500 Emini-Monthly Chart

  • The March monthly Emini candlestick was another consecutive bull bar closing near its high and above the all-time high.
  • Last month, we said that the odds slightly favor March to trade at least a little higher. Until the bears can create a strong sell signal bar, odds continue to favor the market to trade sideways to up.
  • The bulls got follow-through buying above the all-time high in March.
  • That increases the odds that April will likely trade at least a little higher.
  • If there is a pullback, the bulls want another strong leg up completing the wedge pattern with the first two legs being July 27 and March 28.
  • While a minor pullback can come at any moment, trying to pick a top is a low-probability strategy.
  • The bears want a failed breakout above the all-time high and a reversal from a higher high major trend reversal.
  • They also see a large wedge pattern (Dec 2, July 27, and Mar 28).
  • Because of the strong rally in the last 5 months, they will need a strong sell signal bar or a micro double top before traders would be willing to sell more aggressively. So far, there is no strong signal bar yet.
  • Since March closed near its high, it is a buy signal bar for April.
  • For now, odds slightly favor April to trade at least a little higher. 
  • The market remains Always In Long and the move up from October is in a 6-bar bull microchannel.
  • That means strong bulls. That increases the odds of buyers below the first pullback.
  • Traders will see if the bulls can get another follow-through bull bar, or will the market start to show some sign of a loss of momentum.
  • The rally has lasted a long time and is slightly climactic. Traders are looking for signs of a pullback. There are none yet.
  • Until the bears can create a strong sell signal bar, odds continue to favor the market to trade sideways to up.

S&P 500 Emini-Weekly Chart

  • This week’s Emini candlestick was an inside bull bar closing near its high.
  • Last week, we said that traders would see if the bulls can create a follow-through bull bar following the breakout above the ioi (inside-outside-inside) pattern.
  • The bulls managed to get a follow-through bull bar. They have a strong rally in the form of a tight bull channel. 
  • They hope the rally will lead to many months of sideways to up trading after a pullback.
  • The trend remains strong with not much selling pressure or follow-through selling.
  • Because of the climactic nature of the move, a pullback can begin at any moment.
  • However, the odds slightly at least a small sideways to up leg to retest the trend extreme high (currently March 29) after any pullback.
  • If a pullback begins, the bulls want it to be sideways and shallow, filled with bull bars, doji(s) and overlapping candlesticks.
  • The bears want a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 29). 
  • They see a parabolic wedge in the third leg up since October (Dec 28, Feb 12, and Mar 21), an embedded wedge (Feb 12, Mar 8, and Mar 21) and a micro double top (Mar 21 and Mar 29).
  • The bears hope that the sideways tight trading range (the ioi pattern) will be the final flag of the rally.
  • They hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
  • The problem with the bear’s case is that they have not been able to create any meaningful selling pressure. 
  • They will need to create a few strong consecutive bear bars to indicate that they are at least temporarily back in control.
  • However, once traders see a few strong bear bars, the pullback could be halfway over.
  • Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week.
  • The market continues to be Always In Long.
  • The rally has lasted a long time and is slightly climactic. Traders are looking for signs of profit taking but there are none still.
  • The market having more overlapping price action since February is also an indication of a loss of momentum.
  • However, until the bears can create strong bear bars, traders will not be willing to sell aggressively.
  • Sometimes, a euphoric market (as it is now) can continue higher into a blow-off top (parabolic climax). It could be underway.
  • Traders will see if the bulls can create more follow-through buying. Or will the bears be able to create some decent selling pressure in the weeks ahead?
  • So far, selling pressure continues to be weak with no follow-through selling.

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