S&P 500 E-Mini: Bear Inside Bar Indicates Market in Breakout Mode

09/11/2023

3 minutes read

2023.09.11 09:25

Al Brooks

Market Overview: S&P 500 Emini Futures

The weekly chart formed an Bear Inside Bar which means the market is in breakout mode. The bears want a breakout below while the bulls want a breakout above the inside bar. The first breakout from an inside bar can fail 50% of the time. Sometimes, the candlestick after an inside bar is another inside bar, forming an ii (inside inside) which is a breakout mode pattern.

S&P500 Emini Futures

S&P 500 Emini Weekly Chart

This week’s Emini candlestick was an inside bear bar with a prominent tail below.
Last week, we said that odds slightly favor the market to trade at least a little higher and likely still Always In Long.
The market traded sideways to down for the week and closed in the lower half.
Previously, the bulls got a strong trend up (since March) in a tight bull channel.
That increases the odds of at least a second leg sideways to up after a pullback. The second leg sideways to up may still be underway.
They hope that this week was simply a pullback and want a breakout above the bear inside the bar.
The bulls want a retest of the July 27 high followed by a strong breakout above.
The next targets for the bulls are the March 2022 high area and the all-time high.
If the market trades lower, they want a reversal up from around the 20-week exponential moving average or from a double-bottom bull flag with the August 18 low.
Previously, the bears got a pullback from a climactic move and tested the 20-week exponential moving average.
They want another leg down from a lower high major trend reversal.
They will need to create follow-through selling trading far below the 20-week exponential moving average to increase the odds of a deeper pullback.
Since this week’s candlestick was an inside bar, the market is in breakout mode. The bulls want a breakout above while the bears want a breakout below the inside bar.
Because it is a bear bar closing in the lower half, the market may first break out below the inside bar.
The first breakout from an inside bar can fail 50% of the time.
Sometimes, the candlestick after an inside bar is another inside bar, forming an ii (inside inside) which is a breakout mode pattern.
While the Emini could still trade a little lower, odds slightly favor the market to still be Always In Long.

S&P 500 Emini Daily Chart

The Emini traded sideways to down earlier in the week. Thursday gapped down but reversed into a bull bar with some follow-through buying on Friday albeit weaker.
Previously, we said that odds favor at least a small retest of the prior leg’s extreme high (Jul 27) after the current pullback.
The bears got a reversal from a climactic move and a wedge pattern (Dec 13, Feb 2, and Jul 27).
They want a second leg sideways to down from a lower high major trend reversal. It is currently underway.
They hope that Thursday and Friday were simply a small pullback and want another strong leg down testing the August 18 low.
They will need to continue creating strong bear bars closing near their lows, trading far below the August 18 low to increase the odds of a reversal down.
The bulls want a reversal up from a higher low major trend reversal followed by a retest of the July 27 high and a strong breakout above.
If the market trades lower, they want a reversal up from a double-bottom bull flag with the August 18 low.
A pullback from a trend would usually last at least TBTL (Ten Bars, Two Legs). The current pullback which started from July 27 has fulfilled the minimum requirement.
Since Friday was a bull bar doji closing in the lower half of its range, it is a sell signal bar for Monday.
Traders will see if the bears can create follow-through selling or will the market trade slightly lower but find buyers near the August 18 low area.
For now, while the Emini could still trade a little lower, odds slightly favor the market to still be Always In Long.