Weekend report co-author Andrew A.
Market Overview: Weekend Market Analysis
The SP500 Emini futures should form a bear candlestick in August on the monthly chart after a rare streak of 6 consecutive bull bars. If so, the Emini will probably correct 15 to 20% into October.
The EURUSD Forex monthly chart formed a small doji bar in July after a big bear bar in June. It is near the bottom of a yearlong trading range. It should bounce in August. On the weekly chart, this week was the 1st pullback in an 9-bar bear micro channel. The 1st reversal up should only last a few bars before there is a test back down.
EURUSD Forex market
The EURUSD monthly chart
- On the monthly EURUSD Forex chart, July was a small doji bar. It is a weak buy signal bar for a higher low in a bull channel, especially after the big bear bar in June.
- A weak buy setup usually leads to a bounce and not a bull trend. Therefore, August should go above the July high, but the rally will probably not reach the May high.
- After the big bear bar in June, there was no follow-through from the bears.
- Possible end to a 2-legged pullback from January and a bounce from a higher low wedge bull flag.
The EURUSD weekly chart
- The EURUSD Forex weekly chart rallied this week. The rally should test the June 25 bull bar within a few weeks.
- However, this week had a prominent tail above.
- Also, the context is bad for the bulls. Last week was a bear bar, which is a weak buy signal bar.
- Additionally, the EURUSD has been in a bear microchannel for 9 weeks. Traders will therefore likely sell within a couple of weeks, expecting a test of last week’s low and possibly the March 2021 low.
- 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.
- The selloff is reversing up from just above the neckline of the Head & Shoulders pattern. The bears needed a follow-through bar, but EURUSD reversed higher and became a failed breakout instead.
- A possible wedge bull flag higher low reversal if the bull can get follow-through buying over the next few bars.
S&P500 Emini futures
The Monthly Emini chart
- July was the 6th consecutive bull bar. This has not happened in 10 years. Therefore, a 7th bull bar would be even more unusual. Consequently, August should be a bear bar.
- If it 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. The bulls are buying aggressively into the close of every month and that increases the chance of at least slightly higher prices.
- Sometimes in a buy vacuum, sellers stop selling until the price reaches measured moves and targets above.
- The next measured move is 4537 based on the height of the pandemic.
- It would also be a trend channel line overshoot which increases the odds that we will see sellers appear.
The Weekly S&P500 Emini futures chart
- This week was a bear doji bar. That is a weak sell signal bar, but the weekly chart is extremely overbought.
- The bulls were not able to create a follow-through bar after breaking into new highs from last week’s outside bull bar.
- 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%.
- Traders have bought every reversal for a year. They know the odds are that reversals will fail.
- However, they also know that one should be successful soon.
- When there is a successful trend reversal, there is not a consensus that it will succeed until it is already half over.
- Until there is a strong, clear reversal, traders will continue to bull every 1 – 2 bar (week) selloff.
- A Small Pullback Bull Trend is a sign of very eager bulls. They are buying small pullbacks because they doubt there will be a big pullback.
- Even once there is a big pullback (15 – 20%), they will still buy it, betting that there will be a test of the old high. Consequently, the 1st reversal down will still be minor, even if it is 20%.
- The next targets for the bulls are the trend channel line and the measured move around 4537.
The Daily S&P500 Emini futures chart
- Friday triggered a micro double top sell signal, but Thursday was a bull bar. This is therefore a low-probability sell signal.
- There is also an expanding top with the July 7 and July 14 highs, and the Emini is near the top of the bull channel, using the May 7 and July 14 highs.
- Until there is a strong reversal down, traders will continue to bet on new highs.
- Bear bars have tails below and small bodies, which means the bears are not selling into the close of bars. They lack conviction and are unwilling to sell low.
- Also, there are no consecutive strong bear bars.
- Until the bulls aggressively take profits and the bears generate sustained, aggressive selling, the bulls remain in control.
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