6/5/25 Can Bears Create More FT Selling or Fail to Do So?

1. Monday's candlestick (May 5) was a bull doji closing near its high with a long tail below. It has the shape of a bull reversal bar, but the candlestick has a small bull body.
   
2. In our previous report, we said traders would see if the bears could create more follow-through selling breaking below the April 22 low. If there is a breakout, traders will see if there are strong follow-through selling. Or would the market form a pullback towards the 20-day EMA over the next few days instead?
   
3. The market gapped down and broke below January's low. While there was some follow-through selling, the long tail below the candlestick and the bull body indicate the bears are not as strong as they hope to be.
   
4. The bears want a a strong breakout below the April 22 January low followed by a measured move based on the height of the 5-month trading range which would take the market to the 3200 area.
   
5. The long tail below the last two candlesticks indicates profit-taking activity as prices probe lower.
   
6. The bears must create a strong breakout below January's low with follow-through selling to increase the odds of a successful breakout.
   
7. If the market trades higher, they want the 20-day EMA to act as resistance and form a double top bear flag with the April 25 high.
   
8. The bulls want a reversal from a double bottom (with the January low). They want a failed breakout and a reversal from a lower low major trend reversal.
   
9. As strong as the current selling is, the bulls see it as a sell vacuum and a bear leg within the trading range.
   
10. They hope the bottom of the trading range will act as support.
    
11. They see Monday's candlestick possibly acting as a signal bar. They must create a strong entry bar with follow-through buying to increase the odds of testing the 20-day EMA.
    
12. The market broke out below the January low on Monday, but the candlestick closed near its high and had a bull body with a long tail below. It was not a strong breakout bar.
    
13. Traders want to see if the bears could create sustained follow-through selling.
    
14. Or will the market stall below the January low and form a pullback towards the 20-day EMA instead?
    
15. So far in the night session, the market traded above yesterday's high but reversed into a small bear bar.
    
16. For tomorrow (Tuesday, 6/5/25), traders will see if the bears can create more follow-through selling below the January low.
    
17. Or will the market form a small retest of yesterday's low (but possibly forming a higher low), but stall and trade higher instead?
    
18. The market remains in a large trading range (4500 - 3850). Traders may Buy Low and Sell High within the trading range.
    
19. That means buying in the lower third of the trading range, and selling in the upper third until there is a strong breakout from either direction with follow-through buying/selling.
    
20. Breakout from trading ranges can fail and odds slightly favor the trading range to continue.
    

Andrew