- Market Overview: Weekend Market Analysis
- EURUSD Forex market
- S&P500 Emini futures
- The Monthly Emini chart has gap up in April
- The Weekly S&P500 Emini futures chart in strong Small Pullback Bull Trend
- The Daily S&P500 Emini futures chart broke above 4,000 Big Round Number
Market Overview: Weekend Market Analysis
The SP500 Emini futures market gapped up on the monthly chart, and broke above the 4,000 Big Round Number. The bulls need follow-through buying next week, to increase the chance that the rally will continue up to measured move targets at around 4,200. Because the Emini gapped up and is overbought on the daily, weekly, and monthly charts, and at a major Big Round Number, there can be a pullback at any time. The bears need at least a couple big bear days before traders will expect more than a shallow pullback.
The EURUSD Forex monthly chart is continuing its reversal down from a yearlong wedge top. It is now in last year’s trading range, and near the bottom of the final leg up of the wedge. This is a support zone, and it increases the chance of a bounce for a couple weeks in April.
EURUSD Forex market
The EURUSD monthly chart has sell climax in support zone
- Turning down from a wedge rally to a lower high double top with the February 2018 high.
- Selloff from a wedge top typically has at least a couple legs down.
- First target is bottom of final leg up in the wedge. That is the November low at 1.16.
- Next target is the March 2020 high at 1.15. That is the breakout point for last summer’s rally. Markets usually have a pullback to the breakout point.
- The test can reverse up from a little above or below the breakout point. Most traders want current selloff to get closer to the breakout point, before being confident that the bull trend will resume.
- March was a big bar and therefore climactic. If enough bears use this as an opportunity to take some windfall profits, could go sideways to up for a several weeks.
- Back in late 2020 trading range, so might go sideways again here, before reaching 1.16.
- Traders will sell 1st brief rally since 2nd leg down likely. Also, selloff should reach November low at 1.60.
- Traders expect a 2- to 3-month trading range to begin either in April or May.
- Less likely, the bull trend will resume in April, or the EURUSD will collapse to March 2020 low without a bounce.
S&P500 Emini futures
The Monthly Emini chart has gap up in April
Breakout above 4,000 Big Round Number
- Finally broke above 4,000 Big Round Number.
- This is only the 4th time in the 100-year history of the S&P when it broke above a multiple of 1,000.
- When the S&P breaks above a Big Round Number or any resistance, it often soon goes sideways. The sideways move can last a few bars or many bars.
- The breakout above 1,000 came in 1998 (not shown). The stock market entered a big trading range, and did not get above 2,000 until 2014. It then went sideways for 2 years.
- It broke above 3,000 in 2019 and went sideways for a year.
- While the current breakout could continue up for many months, the Emini will probably be sideways around 4,000 for many months. It could get stuck here for more than a year.
Gap up on monthly chart
- April gapped above the March high. All gaps on the monthly chart are small. Most small gaps close before the end of the month, like in December 2020.
- If gap does not close by end of month, it usually closes within a few months, like the gaps in November 2019 and August 2020.
Targets for bulls and bears
- Bulls want the gap to be a measuring gap. They hope that gap will remain open, and lead to a 700-point measured move up, based on the height of the wedge that began in September.
- They additionally want a 1,200 measured move up based on the height of the 2018/2020 expanding triangle. While the Emini will eventually get there (and to 10,000 and 100,000!), it will probably have several pullbacks first.
- More likely, there will be a 2-month pullback soon, instead of a quick measured move up.
- There were tails on the top of January and February. They were caused by reversals as the bars were forming.
- March did not reverse, but 2-bar reversals are common. If April were to selloff, it would form a 2-bar reversal with March.
- That would create a micro wedge top with the January and February highs, which would increase the chance of a pullback in May.
- There has only been a single pullback since the pandemic low. Only one bar (September) fell below the low of the prior bar (month).
- Pullbacks tend to be more complex as trends mature. Next pullback will probably last at least a couple months.
- Most recent bars on the monthly chart have been 200 – 500 points tall. A 2-bar pullback will probably be 10 – 20%.
- There is currently only a 20% chance that the 1st pullback will be 35%, like last year’s February/March pullback.
The Weekly S&P500 Emini futures chart in strong Small Pullback Bull Trend
- The past 2 weeks were big bull bars closing on their highs.
- As strong as the bull trend has been for the past year, this is an acceleration up.
- There are 2 ways to draw the channel. The Emini is breaking above the longer-term bull channel (red line), and it is just below the channel based on the November 9/February 16 highs (green line).
- Next magnet is the measured move up to 4,195, based on the January 29/March 4 double bottom bull flag.
- Above that is a measured move at 4,244, based on the gap created by the September 25 breakout test of the June 5 high.
- A reversal down from a Small Pullback Bull Trend is typically minor. That means a couple legs sideways to down. But a pullback could last a couple months, like in September and October last year.
- 1st target for the bears is the January/March double bottom at 3,700.
- If the pullback continues down, the next target is the November 10 low at 3,500 at the start of the tight bull channel.
Possible blow-off top (exhaustive buy climax)
- Small Pullback Bull Trend that has lasted 50 bars, and begins to accelerate up, often reverses down from a blow-off top. That is an exhaustive buy climax.
- Stop for the bulls is far below. Easiest way to reduce risk is to take some profits. If enough bulls take profits, there is often a pullback with a couple legs down.
- Currently no sign of a top, but at top of bull channel.
- Until there is a strong reversal down, higher prices are likely.
- Most likely will begin to pull back soon.
- Alternatively, will break strongly to the upside. Then, 75% chance the profit taking would soon begin.
What could cause a strong breakout above the bull channel?
- Late in a bull channel, bears expect the bulls to take profits. Bears begin to short.
- If bulls do not take profits and instead continue to buy, channel continues up.
- At some point, weak bears become worried that this will be one of the 25% of cases where there is a successful breakout into a stronger bull trend.
- They buy back their shorts in a panic. This creates a sharp rally above the bull channel.
- 75% chance that a bull breakout above a bull channel, will begin to turn down within about 5 bars.
- This is because bulls see it as a great chance to take windfall profits, and they know the breakout will probably be brief, and then reverse down.
- Also, the strong bears bet that the breakout will fail. They scale into shorts, and they are never going to buy them back until they are profitable.
- With no weak bears left to buy back shorts, and with bulls starting to sell, there can be a sharp reversal down, like in early 2018.
- 1st reversal down from an exhaustive buy climax typically has at least 2 legs sideways to down. Sideways is more likely. The pullback will probably be 10%, but it might be 20%.
- Traders then decide if the pullback is a bull flag, or if it will become a lower high major trend reversal.
The Daily S&P500 Emini futures chart broke above 4,000 Big Round Number
- Breaking above March 17/March 26 double top, and above 4,000 Big Round Number.
- Bulls need follow-through buying on Monday to increase chance of successful breakout.
- But streak of 6 consecutive bull bars is unusual, and therefore climactic. Increases the chance of a bear bar early next week.
- Bulls might have to wait until after a 1- to 2-day pullback to get follow-through buying.
- 1st target is measured move up to 4,104, based on height of double top.
- That is also around top of bull channel.
- Next target is measured move up to 4,195, based on height of January 29/March 4 double bottom.
- Bears want Thursday’s breakout to fail. Need consecutive strong bear bars before traders will conclude that there might be a pullback down to the March 25 higher low.
- Big pullbacks and many big bear bars since start of year. Entire rally since early January looks like a bull leg in what will become a trading range. Once there is a pullback, it should test the bottom of the likely developing trading range at 3,700.
- Bulls hoping that Thursday’s strong breakout will convert the 3-month weak bull trend into a strong bull trend. If they get a series of bull bars, and a tight bull channel over the next couple weeks, traders will look for a 250-point measured move up, based on the January to March trading range.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed Emini price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Time
When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.