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S&P 500 E-Mini Forms a New All-Time High - What's Next?

Published 05/20/2024, 08:08 AM
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Market Overview: S&P 500 Emini Futures

The market traded higher and formed an S&P 500 E-Mini new all-time high this week. The bulls want a strong a strong breakout above the March 21 high followed by the start of a larger broad bull channel phase. The bears want a reversal from a higher high major trend reversal or a double top with the March 21 high. At the very least, they want a retest of the April 19 low, even if it forms a higher low.

S&P 500 Emini Futures

The Weekly S&P 500 Emini ChartS&P 500 Emini-Weekly Chart

  • This week’s Emini candlestick was another follow-through bull bar with a prominent tail above and closing above the March 21 high.
  • Last week, we said that the market could still be in the sideways to up pullback phase. However, traders should be open to the possibility of a second leg sideways to down after the current pullback.
  • The bulls have a strong rally in the form of a tight bull channel. 
  • They hope that the rally will lead to months of sideways to up trading after a pullback (broad bull channel). 
  • They want a strong a strong breakout above the March 21 high followed by the start of a larger broad bull channel phase.
  • This week traded above the March 21 high. The bulls need to create a follow-through bull bar to confirm the breakout.
  • They hope to get another strong leg up completing the wedge pattern with the first two legs being July 27 and March 21.
  • If the market trades lower, they want the pullback to form a higher low or a double-bottom bull flag with April 19 low and the 20-week EMA to act as support. 
  • The bears got a reversal from a higher high major trend reversal (against 2021 high), a large wedge pattern (Feb 2, July 27, and Mar 21), and a final flag reversal (ioi pattern in March).
  • 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 selloff initial pullback retraced more than 5% and has tested the 20-week EMA. However, the bears were not able to create the second leg sideways to down.
  • They want a reversal from a higher high major trend reversal or a double top with the March 21 high.
  • At the very least, they want a retest of the April 19 low, even if it forms a higher low.
  • Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week albeit weaker (prominent tail above) and at a potential resistance area (prior high).
  • The market could still be in the sideways to up pullback phase. 
  • However, traders should be open to the possibility of a second leg sideways to down after the current pullback. This remains true.
  • For now, traders will see if the bulls can create another strong follow-through bull bar or will the market start to stall followed by a retest of the April 19 low in the weeks ahead.
  • If the market trades lower, traders will see if the 20-week EMA will continue to act as support.
  • If the retest of the April 19 low is weak, we may be entering into a broad bull channel or a trading range phase.

The Daily S&P 500 Emini ChartS&P 500 Emini-Daily Chart

  • The market gapped up on Wednesday and broke above the all-time high. Thursday traded higher but reversed into a bear doji. Friday was a small bull doji.
  • Last week, we said that traders would see if the market would start to stall around the all-time high area. If it does, the odds of at least a small second leg sideways to down will increase.
  • The bears got a reversal from a higher high major trend reversal (against 2021 high), a large wedge pattern (Feb 2, July 27, and Mar 21), and a final flag reversal (first half of March). 
  • They see the current move simply as a retest of the prior high and want a reversal from a higher high major trend reversal or a double top (with the March 21 high).
  • They want a retest of the April 19 low, even if it only forms a higher low.
  • Previously, the bulls got a strong rally which lasted over 5 months.
  • They hope that the current rally will form a spike and (broader) channel which will last for many months after a deeper pullback.
  • They got a breakout above the prior high (Mar 21), but the follow-through buying was limited.
  • They hope that Thursday and Friday were simply a pullback and want another leg up trading far above the March 21 high. 
  • They hope that the broad bull channel phase has begun.
  • The move up to retest the March 21 high is strong with bull bars closing near their highs and gaps. 
  • Traders may be doubting the strength of the bears expecting the worst case to be trading range and not a reversal of the bull trend. 
  • The bulls will need to create a strong breakout with follow-through buying to increase the odds of a resumption of the trend.
  • If the market trades lower, they want a reversal from a double-bottom bull flag (with Apr 19) and a higher low.
  • For now, traders will see if the bulls can create a strong breakout above the March 21 high.
  • Or will the market start to stall around the all-time high area? If it does, the odds of a retest of the April 19 low will increase.
  • If a retest of the April 19 low forms, traders will see the strength of the move. 
  • If it is strong with big consecutive bear bars closing near their lows and breaking far below the 20-day EMA, that will increase the odds of the market retesting and possibly breaking below the April 19 Low.
  • If the second leg sideways to down is weak (overlapping candlesticks, doji(s), and bull bars), traders will use the (second leg sideways to down) retest of the April 19 low as an opportunity to buy instead, expecting a possible broad bull channel or a trading range phase.

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