S&P 500 today, after spending much of the day in negative territory, the S&P 500 index staged a comeback in the afternoon, ultimately finishing Monday's session with a gain of 0.2%.
The most recent E-Mini candlestick formed an outside bearish bar, closing near its low and below the 20-week EMA. Last week, we anticipated whether bulls could produce a strong bullish entry bar, ideally closing near its high, or if the market would trend slightly higher but ultimately stall, resulting in a long upper tail or bearish body.
The week began with a higher opening, but the market reversed, closing as an outside bearish bar. This shift provides bears with a pullback from previously established wedge patterns (notably from March 21, July 16, and December 6). They are now aiming for a TBTL (Ten Bars, Two Legs) pullback that is expected to last for several weeks, which is currently underway.
This week’s formation of a lower high suggests a bearish trend reversal, and bears are keen on establishing a strong second leg that moves sideways to down. Given that the week closed below the 20-week EMA, bears must now generate consecutive bearish bars that close near their lows to reinforce their control over the market.
The next targets for sellers include the lows from October and November, along with the bull trend line.
On the other hand, bulls perceive the market as being within a broad bullish channel and aim for the market to maintain an upward trajectory for several months. They view the current movement as a two-legged pullback, hoping for a resumption of the upward trend from a double bottom bull flag formed on November 4 and January 10.
Bulls are counting on the 20-week EMA, the October/November lows, or the bull trend line to provide support. The current bearish candlestick, closing near its low, acts as a sell signal for the upcoming week. The market may still dip slightly towards the October/November lows or the bull trend line area.
Traders will be watching closely to see if bears can create a follow-through bearish bar after this week’s close below the 20-week EMA, or if the market will trade lower but close with a long tail or bullish body instead.
The market has transitioned into a trading range phase. Bears need to demonstrate sustained follow-through selling to convince traders that they are back in control. If the pullback remains sideways and shallow—characterized by overlapping candlesticks, bullish bars, dojis, and candlesticks with long tails below—the chances of a bull trend resumption will increase.
For now, the odds slightly favor a minor pullback that is unlikely to lead to a full reversal.
On the daily chart, the market opened higher on Monday but failed to sustain buying momentum, trading sideways to down for the remainder of the week. Traders had been observing whether bulls could retest the all-time high and break above it in the coming weeks, or if bears would establish a second leg down, potentially testing the October/November lows.
So far, bears have managed to create three downward pushes (on December 20, January 2, and January 10). They are seeking to initiate a pullback lasting several weeks, fulfilling the minimum requirements for a TBTL pullback. The 20-day EMA or the bear trend line is expected to act as resistance, and this has proven accurate thus far.
Bears are aiming for another strong leg down to test the October/November lows along with the 200-day EMA, potentially forming a double top bear flag (on December 26 and January 6). If the market trades higher, bears want to set up a wedge bear flag, with the first two legs being December 26 and January 6.
To solidify their control, bears need to generate consecutive bearish bars that close near their lows. Conversely, bulls view the market as trading within a broad bullish channel and desire a continuation of this trend for months. They are looking for a retest of the all-time high (from December 6) based on a wedge bull flag formed on December 20, January 2, and January 10.
If the market trades lower, bulls expect support from the October/November lows or the 200-day EMA.
The market has entered a trading range, and bears need to create consecutive bearish bars that close below the 200-day EMA to enhance the chances of a reversal. Although the market may still trade lower, traders will be watching to see if bears can achieve follow-through selling that breaks well below the October/November lows or the 200-day EMA, or if bulls can mount a reversal from a wedge bull flag.
For now, the odds lean slightly toward a minor pullback that is unlikely to trigger a full reversal.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
