Emini 7 bull bar streak on monthly chart should end by September

Weekend report co-author Andrew A.

Market Overview: Weekend Market Analysis

The SP500 Emini futures monthly chart 7 bull bar streak continues to slightly favor sideways to upside, but profit taking activity can begin at any moment. Bulls need follow through buying next week while bears wants a failed breakout from the tight trading range.

The EURUSD Forex triggered a Low 1 sell signal and closed near the lows. Odds slightly favor sideways to downside to test the lows of the yearlong trading range areas.

EURUSD Forex market

The EURUSD weekly chart

• The EURUSD Forex weekly chart traded below last week’s low triggering a Low 1 sell signal from a Double Top Bear Flag with July 6^th high.
• Bulls failed to get follow-through buying after last week’s bull bar. Instead of trading above last week’s high, this week traded below its low. Last week was a small bull trap.
• While last week was a High 1 buy signal, it came in a 9-bar bear micro channel. The reversal up was likely to be minor. Traders had been selling below the high of the prior week for 8 weeks. They were eager to have an opportunity to sell above the high of the prior week.
• The bears want a strong break below the November 2020 low, which is the bottom of the yearlong trading range and the neckline of the head and shoulders top.
• They then want a 700-pip measured move down to last year’s low.
• However, trading ranges resist breaking out. Consequently, if there is a break below the November low, it will probably fail within a few weeks.
• Since this week closed at the lows, EURUSD should trade sideways to down next week as it continues to test the low of the yearlong trading range.

S&P500 Emini futures

The Monthly Emini chart

• So far, August is a small bull bar trading slightly above July’s high.
• In the 25-year history of the Emini, there have been only 2 times when there were 7 consecutive bull bars on the monthly chart. If August remains a bull bar, this would be the 3^rd time. There has never been a streak of 8 consecutive bull bars so August or September should be a bear bar.
• If either of them is, the yearlong rally will be a parabolic wedge. That should lead to 2 to 3 months of sideways to down trading.
• But, because the bull trend is so strong, traders will buy the pullback, even if it is 20%.
• The bears have not yet been able to create a bear bar or even a bull bar with a prominent tail on top for 6 months. 
• Sometimes in a buy vacuum, sellers stop selling until the price reaches measured moves and targets above.
• The next measured move is 4537 (not shown) based on the height of the pandemic.

The Weekly S&P500 Emini futures chart

• The Emini weekly bar closed above the top of a 5-week tight trading range. However, the bar was small and therefore the breakout so far is not strong.
• It has been in a Small Pullback Bull Trend for more than 60 bars, which is unusual, and therefore unsustainable and climactic.
• A Small Pullback Bull Trend ends with a big pullback. The biggest pullback so far was the 10% selloff in September. A bigger pullback means 15 to 20%.
• The bears have not been able to create strong bear bars or consecutive bear bars.
• There are also no prominent tails above bars. This means the bulls have been buying into closes, and they do that because they expect the next bar to be higher.
• The move up is in a tight bull channel which is also a sign of strength for the bulls.
• Until the bulls aggressively take profits, the bears will not sell. The bears need to see one or more big bear bars before they will look for a 2-to 3-month correction.
• Until then, traders will continue to bet on higher prices and that every reversal attempt will fail.
• The next targets for the bulls are the 4537 measured move based on the height of the pandemic sell-off and the top of the trend channel line around 4600.

The Daily S&P500 Emini futures chart

• The S&P 500 Emini broke above a tight trading range late in a bull trend so the trading range might be the Final Bull Flag.
• Small breakout to new all-time high and above the 10-day tight trading range.
• The bulls need follow-through buying next week to increase the odds of a 60-point measured move up, based on the height of the trading range.
• If the rally reaches the measured move up around 4500, it will break the trend channel line. A break above a bull channel has a 75% chance of starting to reverse down to the bottom of the channel (bull trend line, not shown) within about 5 bars.
• The bears want the breakout above the 10-day tight trading range to fail. If any breakout is going to fail, it should do so within about 5 bars.
• While the trend has been overextended and extreme, bulls continue to bet on higher prices because they know that in a strong trend, most reversal attempts fail.
• Traders need to see aggressive profit-taking and consecutive strong bear bars before they will be willing to short aggressively.

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