Monthly Emini Third Leg Up

Market Overview: S&P 500 Emini Futures

The market is forming a monthly Emini third leg up, with the first two legs being the March 21 and July 16 highs. The bulls want another leg up completing the wedge pattern and the embedded micro wedge pattern with the first two legs being the August 30 and September 26 highs. The bears see the current move as a retest of the prior all-time high (Jul) and want a reversal from a higher high major trend reversal or a double top. The problem with the bear’s case is that they could not create bear bars with follow-through selling.

S&P500 Emini futures

The Monthly Emini chart

• The September monthly Emini candlestick was a bull bar closing near its high with a long tail below.
• Last month, we said that the odds slightly favor the market to trade at least a little higher in September. Traders would see if the bulls can create a strong retest of the prior all-time high followed by a breakout above or if the market would trade slightly higher but stall around the all-time high area instead.
• So far, while the market has made a new all-time high in September, it did not close significantly higher than the July high.
• The bulls managed to create a retest and break out of the July high, closing in the new all-time high territory.
• They hope that the market has entered a broad bull channel phase which will last for many months.
• They want any pullback to be sideways and shallow (filled with weak bear bars, bull bars, doji(s) and overlapping candlesticks) and form a higher low or a double bottom bull flag with the April 19 low. So far, the bulls got what they wanted.
• Next, the bulls want another leg up completing the wedge pattern with the first two legs being the March 21 and July 16 highs.
• They also want the third leg up completing the embedded micro wedge pattern with the first two legs being the August 30 and September 26 highs.
• The bears see the current move as a retest of the prior all-time high (Jul) and want a reversal from a higher high major trend reversal or a double top.
• The problem with the bear’s case is that they could not create bear bars with follow-through selling.
• The long tails below August and September candlesticks indicate the bears are not yet as strong as they hoped to be.
• They need to create some bear bars with follow-through selling to show that they are at least temporarily back in control.
• Since September’s candlestick was a bull bar closing near its high with a long tail below, it is a buy signal bar for October.
• Odds slightly favor October to trade at least a little higher.
• The market remains Always In Long.
• Traders will see if the bulls can create another strong breakout into new all-time high territory.
• Or will the market trade higher but stall and close the month’s candlesticks with a long tail or a bear body instead?

The Weekly S&P 500 Emini chart

• This week’s Emini candlestick was a bull doji closing in the upper half of its range.
• Last week, we said that the candlesticks were becoming smaller over the prior 3 weeks indicating a loss of momentum and the risk of a minor pullback is increasing. Traders would see if the bulls can create another breakout into new all-time high territory with follow-through buying or if the market would stall around the current levels, forming bear bars in the weeks ahead instead.
• The market traded below last week’s low but reversed to close with a bull body.
• The bulls hope the market is in the broad bull channel phase and want a resumption of the move.
• They must create a strong breakout with follow-through buying to increase the odds of the trend resuming.
• They want another leg up completing the wedge pattern with the first two legs being March 21 and July 16 highs and the embedded wedge in the current leg up with the first two legs being August 30 and September 26 highs.
• If the market trades lower, they want the 20-week EMA or the bull trend line to act as support, forming a double bottom bull flag with the September 6 low.
• They want any pullback to be sideways and weak (with bull bars, doji(s), and overlapping sideways).
• The bears see the current rally as a retest of the prior all-time high (Jul).
• They want a reversal from a double top (Jul 16 and Sep 26) and a higher high major trend reversal.
• They want the market to stall around the current levels and start forming bear bars.
• If the market trades higher, they want a failed breakout followed by a strong reversal bar or a micro double top to form in the weeks ahead.
• They need to create a few strong bear bars to indicate that they are back in control.
• Since this week’s candlestick is a bull doji closing in its upper half, it is a buy signal bar for next week.
• The market may still trade slightly higher.
• The candlesticks are becoming smaller over the last 4 weeks indicating a loss of momentum.
• However, the bears have not yet been able to create strong bear bars with follow-through selling. Until they can do that, the odds slightly favor sideways to up still.
• For now, traders will see if the bulls can create another breakout into new all-time high territory with follow-through buying.
• Or will the market trade slightly higher but stall, forming bear bars in the weeks ahead instead?

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