Significant Market Trend Predicted as S&P 500 E-Mini Exhibits Inside-Outside-Inside Breakout Mode Pattern

Significant Market Trend Predicted as S&P 500 E-Mini Exhibits Inside-Outside-Inside Breakout Mode Pattern

Market Overview: S&P 500 Emini Futures

On the weekly chart, the market has been stalling in the last 3 weeks by trading sideways and is forming an Emini ioi breakout mode pattern (inside-outside-inside). The bulls want a breakout above, while the bears want a breakout below the inside bar. The first breakout can fail 50% of the time.

S&P 500 Emini Futures

Emini Weekly Chart

  • This week’s Emini candlestick was an inside bull doji closing in the lower half of its range with a long tail above.
  • Last week, we said that traders are looking for signs of profit taking but there are none still. The candlestick after an outside bar sometimes is an inside bar, forming an ioi (inside-outside-inside) breakout mode pattern. 
  • This week formed the ioi (inside-outside-inside) breakout mode pattern. 
  • The bulls have a tight bull channel. They want a strong breakout into all-time high territory, hoping that it will lead to many months of sideways to up trading after a pullback.
  • They will need to continue to create sustained follow-through buying above the prior all-time high.
  • Traders expect to see some profit-taking activity once the market starts to stall. The market trading sideways for the last 3 weeks is an indication of the market stalling.
  • If a pullback begins, the bulls want it to be sideways and shallow, filled with bull bars, doji(s) and overlapping candlesticks.
  • The bears hope that the strong rally is simply a buy-vacuum test of the prior all-time high.
  • They want a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 8). They want a failed breakout above the all-time high and the trend channel line.
  • They also see a parabolic wedge in the third leg up since October (Dec 28, Jan 30, and Mar 8) and an embedded wedge (Jan 30, Feb 12, and Mar 8). This week also formed a micro double top (Mar 8 and Mar 12).
  • They hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
  • The problem with the bear’s case is that the follow-through selling has been weak. They will need to create a few strong consecutive bear bars to indicate that they are at least temporarily back in control.
  • However, once traders see a few strong bear bars, the pullback could be halfway over.
  • If the market trades higher, the bears hope that the sideways tight trading range (in the last 3 weeks) will be the final flag of the rally.
  • Since this week’s candlestick is an inside bar, the market has formed an ioi (inside-outside-inside) breakout mode pattern. 
  • The bulls want a breakout above, while the bears want a breakout below the inside bar. The first breakout can fail 50% of the time.
  • The market continues to be Always In Long. However, the rally has lasted a long time and is slightly climactic. 
  • Traders are looking for signs of profit taking but there are none still. Until the bears can create strong bear bars, traders will not be willing to sell aggressively.
  • Sometimes, a euphoric market (as it is now) can continue higher into a blow-off top (parabolic climax). 
  • Side note: There are signs of a blow-off top in the stocks of the leaders of the rally such as Nvidia (NASDAQ:) and Meta (NASDAQ:).
  • Traders will see if the bulls can create a breakout from the tight trading range or will the bears start to create some decent bear bars soon.
  • Once the market starts to stall and traders are convinced that the profit-taking phase has begun, the selling can be strong and last at least a few weeks.

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