E-Mini Forms Inside Outside-Inside-Pattern and No Follow-Through Bull Bar

2023.07.10 12:01

The weekly chart was an  ioi pattern (inside-outside-inside), which is a breakout mode pattern. The bulls did not get a follow-through bull bar following last week’s breakout above the August high. They want the market to trade above this week’s high to trigger the High 2 buy signal. However, a bear bar is not an ideal signal bar. The bears want a reversal down from a wedge pattern (Dec 13, Feb 2, and Jun 30), a double top bear flag (August) and a micro double top (Jun 16 and June 30).

S&P500 Emini futures

The Weekly Emini chart

• This week’s Emini candlestick was an inside bear bar closing near its low.
• Last week, we said that the odds slightly favor the market to still be in the sideways to up phase and sometimes, the candlestick after an outside bar is an inside bar or has a lot of overlapping price action.
• This week was an inside bar, and the market formed an ioi (inside-outside-inside) pattern, which is a breakout mode pattern.
• The bulls got a strong leg up creating the wedge pattern with the first two legs being December 13 and February 2.
• They want a breakout trading far above the August high followed by a measured move using the height of the 6-month trading range which will take them to the March 2022 high area.
• The bulls did not get a follow-through bull bar to confirm last week’s breakout above the August high.
• They hope that the last 3 weeks were simply forming a pullback and want the market to trade above this week’s high to trigger the High 2 buy signal. However, a bear bar is not an ideal signal bar.
• The bears want a reversal down from a wedge pattern (Dec 13, Feb 2, and Jun 30), a double top bear flag (August) and a micro double top (Jun 16 and June 30).
• They hope to get a failed breakout above the August high. If there is a failed breakout, it would usually occur within 5 bars after the breakout.
• At the very least, they want a larger pullback from the trend channel line overshoot.
• The problem with the bear’s case is that they have not been able to create strong follow-through selling since the March low.
• They will need to create consecutive strong bear bars closing near their lows to convince traders that a deeper pullback could be underway.
• The market has formed an ioi (inside-outside-inside) pattern, which is a breakout mode pattern.
• The bears want a breakout below while the bulls want a breakout above this week’s low and high respectively.
• Since this week was a bear inside bar closing near its low, the market may first break below this week’s low.
• The first breakout from an inside bar can fail 50% of the time.
• The move up since March 13 low is strong and in a tight bull channel. The odds slightly favor the market to still be Always In Long.
• However, the Emini may still need to trade sideways to down a little while more to work off the recent overbought conditions.
• If there is a deeper pullback, a reasonable target is near the 20-week exponential moving average.

The Daily S&P 500 Emini chart

• The Emini traded sideways to down for the week. Friday traded higher but reverse to close as a doji bar with a long tail above.
• Previously, we said that odds slightly favor the Emini to still be in the minor pullback phase and for a second leg sideways to up after the pullback.
• The market formed a small second leg sideways to up retesting the June 16 high.
• The bulls want a measured move up using the height of the 6-month trading range which will take them near the March 2022 high.
• They will need to break far above the August high with follow-through buying to increase the odds of reaching the measured move target.
• The move up since March 13 low is in a tight bull channel which means strong bulls.
• However, it has also lasted a long time and is slightly climactic.
• The market may still need to trade sideways to down a little longer to work off the recent overbought condition.
• If there is a deeper pullback, the Bulls want a larger second leg sideways to up after that.
• The bears have not yet been able to create credible selling pressure.
• They see the move up from October 2022 simply as forming a large wedge (Dec 13, Feb 2, and Jun 16) within a broad bear channel.
• The longer they fail to create the trend resumption lower (the more candlesticks in between) from the selloff from January – October 2022 to now, the less relevant the effects of the prior move down would have on the current price action.
• The bears want a failed breakout above the August high and a reversal from a trend channel line overshoot and a small double top (Jun 30 and Jun 16).
• They will need to create consecutive bear bars closing near their lows, trading far below the 20-day exponential moving average to increase the odds of a deeper pullback.
• For now, while the market is likely still Always in Long, the Emini may need to trade sideways to down a little while longer to work off the recent overbought condition.
• Traders will see if the bears can create strong bear bars with follow-through selling or will the pullback phase be weak (with overlapping bars, doji(s), and bull bars).

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