Market Overview: S&P 500 Emini Futures
The weekly chart formed an Emini breakout above the ioi pattern. The bulls need to create follow-through buying to confirm the breakout above. The bears hope that the sideways tight trading range (the ioi pattern) will be the final flag of the rally.
S&P500 Emini futures
The Weekly S&P 500 Emini chart
- This week’s Emini candlestick was a bull bar closing in its upper half with a prominent tail above.
- Last week, we said that the market has formed an ioi (inside-outside-inside) breakout mode pattern, and the bulls want a breakout above, while the bears want a breakout below the inside bar.
- This week opened higher and then broke out above the ioi (inside-outside-inside) pattern.
- The bulls have a tight bull channel. They hope the rally will lead to many months of sideways to up trading after a pullback.
- Since this week was a breakout above the ioi (inside-outside-inside) pattern, the bulls need to create a follow-through bull bar to confirm the breakout.
- If a pullback begins, the bulls want it to be sideways and shallow, filled with bull bars, doji(s) and overlapping candlesticks.
- The bears want a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 21).
- They want a failed breakout from the ioi (inside-outside-inside) pattern.
- They also see a parabolic wedge in the third leg up since October (Dec 28, Feb 12, and Mar 21) and an embedded wedge (Feb 12, Mar 8, and Mar 21).
- The bears hope that the sideways tight trading range (the ioi pattern) will be the final flag of the rally.
- 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 they have not been able to create any meaningful selling pressure. 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.
- Since this week’s candlestick is a bull bar closing in its upper half, it is a buy signal bar for next week.
- 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). It could be underway.
- Traders will see if the bulls can create a follow-through bull bar following this week’s breakout above the ioi (inside-outside-inside) pattern.
- So far, selling pressure continues to be weak with no follow-through selling.
The Daily S&P 500 Emini chart
- The market continued sideways earlier in the week and broke above the tight trading range on Wednesday. Thursday opened higher but closed as a small bear doji. Friday was another bear doji.
- Last week, we said that the market is still Always In Long. However, the rally has lasted a long time and is slightly climactic. Traders should be prepared for a minor pullback which can begin at any moment.
- So far, the bears have not yet been able to create any meaningful selling pressure and follow-through selling breaking below the 20-day EMA.
- The bulls got a tight bull channel making a new all-time high.
- They hope that the current rally will form a spike and channel which will last for many months after a deeper pullback.
- They got 3 pushes up since the January low, therefore a wedge (Feb 12, Mar 8, and March 21).
- The third leg up (since Feb 21 low) consists of 3 pushes (Mar 4, Mar 8, and Mar 21) therefore an embedded wedge.
- The risk of a profit-taking event is elevated. However, bears have not yet been able to create any meaningful selling pressure and follow-through selling.
- If there is a deeper pullback, the bulls want at least a small sideways to up leg to retest the current trend extreme high (now March 21).
- The bears want a reversal from a higher high major trend reversal, a large wedge pattern (Feb 2, July 27, and Mar 21) and a parabolic wedge (Dec 28, Feb 12, and Mar 21).
- They also see an embedded wedge in the current leg up (Mar 4, Mar 8, and Mar 21).
- They hope the recent sideways tight trading range will be the final flag of the rally.
- The bears will need to create consecutive bear bars closing near their lows and trading far below the 20-day EMA and the bear trend line to indicate that they are at least temporarily back in control.
- The problem with the bear’s case is that they have not yet been able to create any meaningful selling pressure at all. Until they can do so, traders will not be willing to sell aggressively.
- So far, while the bulls managed to create a breakout above the tight trading range, the follow-through buying has been disappointing.
- However, the selling pressure remains weak still (no strong consecutive bear bars breaking below the 20-day EMA).
- For now, the market is still Always In Long. Traders will see if the bulls can continue to create sustained follow-through buying.
- While the rally has lasted a long time and is slightly climactic, there are no signs of strong selling pressure yet.
- The bears need to create sustained follow-through selling trading below the 20-day EMA to show that they are at least temporarily back in control. They have not yet been able to do so.
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It will interesting to see if last week’s breakout resets the wedge count.
Dear Andrew,
A good day to you..
Yeah, it could reset the wedge count..
But I actually thought that the embedded wedge has a better shape now.. it has a more proper 3 pushes..
The selling pressure has been weak.. let’s continue to monitor and see how it plays out..
Have a blessed week ahead Andrew!
Best Regards,
Andrew
Great report Andrew. With the final week of the month next week, will be interesting to see if the bears are able to prevent another strong bull bar for March.
Dear CZ, thank you for going through the report..
Yeah, let’s see if the bulls can create a follow-through bull bar.. or will the bears be able to create a failed breakout..
Let’s continue to monitor and see what happens from here..
Have a blessed week ahead CZ!
Best Regards,
Andrew
Andrew, can you talk about the signs of a blow-off top in the stocks of the leaders of the rally such as Nvidia and Meta, you have not mentioned this in this week’s analysis.
Dear Jun,
Thanks for going through the report..
The signs of blow-off top in many stocks are still there.. the most influential is of course NVDA..
However, at the moment, there is not much interest to sell.. as in, the selling pressure has been weak with poor follow-through in the market.
As long as this is true, people will continue to buy, especially in these strong stocks (For example, for day trades or short swing trades of a couple of days). They represent good candidates to play the upside on a short term basis..
Let’s continue to monitor how the market plays out over the next few weeks.
Have a blessed week ahead Jun!
Best Regards,
Andrew
My observation is based on the price extension above the 200 day MA on the daily chart. In early Nov. 2023 it broke above the MA and then moved way above the increasingly upward sloping average. This is in my opinion unsustainable, and a reversal to the mean will take place.
We saw a similar price behavior back in March 2023 when price moved above the average until early August 2023 and then significantly corrected below the MA in late Oct. 2023.
I believe the phenomenon of reversal to the mean is the most reliable price action predictor.
Dear Reinhold,
Thank you very much for your comments..
I agree with what you said about the revision to the mean behavior..
However, also have to be cautious because a trend can continue on for a long time.. look at what it did in 2021.. it broke away from the 200-ma and continued on for a long long time.. (not saying this time may run as long and as far)
Trying to find a top is a stressful job..
It’s been easier to just buy and hold since Oct.. Taking shorts has been tough with no follow-through selling..
Let’s continue to see how the market plays out..
Have a blessed week ahead!
Best Regards,
Andrew
Will review this, Thanks!
Thanks Andrew for your detailed report. It seems that the market is being controlled by HTF trader i.e. Monthly in particular. The bull channel on the Monthly chart is still in tact with potential MM from October 23 low with July 23 High which will take us toward the 4400 Round number that is also the area of the bull trend channel line. It is also developing a wedge top starting by feb23 – july23 & march23? This week (short one) is also the end of the month / Quarter : interesting to see how it will end up.
Also wondering why you define the market as an euphoric one: if you view the daily chart it seems that the market is respecting the 20ema with reasonable slop rise.
Side note There is a typo on the 1st paragraph: The bulls need to create follow-through selling. should be buying I assume.
Dear Eli! Thank you for spotting the mistake! Omg! Such a glaring one and I missed it! I have made the edit.
I was writing that it is a Euphoric market because there is so much optimism in the market.. there is simply no interest to sell at all (in the index at least, there are some moderate selling in some individual stocks level)
There has just been no significant pullback at all..
Have a blessed week ahead Eli! Thanks again for spotting the typo!
Best Regards,
Andrew
Thanks Andrew for clarifying this.
You’re most welcome Eli, have a blessed week ahead!