Al Brooks | May 23, 2022 09:19AM ET
E-mini bears follow through on the S&P 500 E-mini futures weekly chart. There are 7 consecutive bear bars on the weekly chart, something that has not happened since February 2001. It increases the odds of a bull bar within the next 1 to 3 weeks.
The sell-off has been in a tight bear channel since March. That means strong bears. Odds are, a 2 legged sideways to up pullback (bounce) would be minor.
h2 S&P 500 E-mini futures/h2“The E-mini collapsed on Friday to below a 20% correction from the all-time high. Many stock market investors build up cash from their businesses or elsewhere and then wait for 10%, 20%, and 30% corrections. There were enough buyers to create a midday bull trend reversal. However, the 1st time a market breaks through major support or resistance, it often reverses.
In this case, everyone was looking for a 20% selloff, and therefore there were no buyers just above. Why buy above when you are confident you can soon buy lower? That absence of buyers just above support creates a vacuum down to support. On Friday, it was in the form of a very strong Small Pullback Bear Trend. Many bears took profits, and many bulls went long.
What often happens is that the attempt to reverse soon fails and then there is a successful breakout. It could come in a few days or in a few weeks.
It is important to note that this week was the 7th consecutive bear bar on the weekly chart. Streaks eventually end and therefore are unsustainable and a form of a climax. A 7-week streak has not happened in 21 years. That 2001 streak lasted 8 weeks, and then the E-mini reversed up for a couple of months. This was followed by another new low. No two times are ever identical. However, traders should expect a bounce soon and then an attempt at another low.
While it is possible the selloff could reach the pre-pandemic high just above 3300, which is a 38% correction, it should end before then. In January, I said the E-mini should sell-off in the 1st half of the year, and the selloff could be 20% and possibly reach 3700. I also said it should rally in the 2nd half. I still believe that my January comments are accurate.”
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