Market Overview: Weekend Market Analysis
The SP500 Emini futures triggered the high 2 buy signal this week on the weekly chart, but weak follow-through buying so far. Traders are looking to see if the bulls can create another leg higher. If the Emini stalls at the February 2 lower high, odds are sellers will return and attempt to create a 3rd leg sideways to down.
The EURUSD Forex broke below the 4-month tight trading range this week. The bears want a 400-pip measured move lower based on the height of the trading range. If the bears get that, odds of a test of the March 2020 low increases. The bears will need to create another bear follow-through bar on the weekly chart next week to confirm the breakout. Bulls may attempt another reversal higher around the March 2020 low support area.
S&P500 Emini futures
The Monthly Emini chart
- The February monthly Emini candlestick was a bear bar with a long tail below, closing slightly above the middle of the bar. It broke below the second OO (outside-outside) pattern by trading below the January low but reversed back higher.
- Al has said that due to the back-to-back OO, traders should expect a break below the January low before a break above the January high. A 2nd attempt has a higher probability of success. That would trigger the OO sell signal on the monthly chart and the selloff would probably last 2 to 3 months. The Emini triggered the sell signal in February and it is the second month of the sell-off.
- We have said that while February is a consecutive bear bar, but closing above middle of the bar and its long tail below make it a weak sell signal bar.
- Selling below a weak sell signal bar at the bottom of a developing 7-month trading range is not an ideal sell setup. Odds are there will be buyers below. This remains true.
- The bears want March to break below February followed by a measured move down to around 3600 based on the height of the 7-month trading range. They will need March to close below the February low to convince traders that a deeper selloff is underway.
- The bulls see the January – February selloff as a long-overdue pullback. They want a reversal higher from a micro wedge bull flag (December 3, January 24, February 24) or a double bottom bull flag with the May 2021 or June 2021 low and a retest of the trend extreme followed by a subsequent breakout to a new high.
- Al said that there is a 50% chance that the February 24 low will be the low of the year. March and April form the pair of consecutive months that is the most bullish of the year, and therefore the Emini is entering a timeframe that has an upward bias.
- Al has also said that the bull trend on the monthly chart has been very strong. Even if it sells off for a 10 to 20% correction, that would still only be a pullback on the monthly chart (even though it could be a bear trend on the daily chart) and not continue straight down into a bear trend.
- The best the bears will probably get on the monthly chart is a trading range for many months to around a 20% correction down to the gap on the monthly chart below April 2021 low, and around the 4,000 Big Round Number.
- Most pullbacks since the pandemic crash only lasted 1 month (Jan 2021, Sept 2021, Nov 2021) except for Sept-Oct 2020 which lasted 2 months. (On a side note, there was a lot of uncertainty during Sept-Oct 2020 period leading into the election between Trump vs Biden.)
- Will March be another bear bar? There have not been 3 consecutive bear bars since September 2011. If there is another leg down, traders will see it as the 3rd push down since January, therefore a possible wedge bull flag.
- Al has been saying that the bull trend from the pandemic crash has been in a very tight bull channel. The first reversal down will probably be minor even if it lasts a few months.
- The gap up in April 2021 could lead to a measured move up to 5,801 before the bull trend finally ends.
The Weekly S&P500 Emini chart
- This week’s Emini weekly candlestick was a doji bar. It triggered the high 2 buy signal this week by trading above last week’s high but there was no follow-through buying.
- The bulls see the selloff in January – February as a long-overdue pullback. The bulls need to create consecutive bull bars closing near their highs and far above the February 2 high in the next few weeks to convince traders that a re-test of the high is underway.
- The bears want a reversal down from a head & shoulders (H&S) top where the lower high (February 2) is the right shoulder, but an H&S top is often a minor reversal pattern. The 3rd push down from the right shoulder often is the 3rd leg in what will become a wedge bull flag (October 4, January 24 and February 24).
- We have said that the bears may get another leg lower after a brief bounce, especially if the bulls fail to get strong follow-through buying in the next 1-3 weeks. The Emini will then form a lower high or a double top bear flag with February 2 followed by a 3rd leg sideways to down. This remains true.
- If that were to happen, the bears would then want a strong breakout below the February 24 low and a measured move down to 3600 based on the height of the 7-month trading range. The bulls on the other hand would want the 3rd push down to be a wedge bull flag where January 24 and February 24 were the 1st 2 legs down.
- Al said that there is a 50% chance that the February 24 low will be the low of the year. March and April form the pair of consecutive months that is the most bullish of the year, and therefore the Emini is entering a timeframe that has an upward bias. If there is a break below that low, the Emini might dip below 4,000, but traders will buy it.
- Since this week is a doji bar, it increases the odds that we may see further sideways trading next week.
- If the Emini continue to stall around the current levels in the next 1-2 weeks below the February 2 high, odds are sellers will return and the 3rd leg sideways to down will form. If it does, traders will then monitor the strength of the sell-off.
- Al said that next week will probably trigger the weekly sell signal by trading below this week’s low. It might fall to around 4200 and test the January 24 low.
- There are just not enough buyers so far above the February low and the Emini might have to go lower to find them. They should come in above the February low and create a higher low major trend reversal.
- If there is a new low in March or April, odds are traders will buy it. A third reversal up would then create a wedge bottom, and that would likely be the low for many months.
The Daily S&P500 Emini chart
- The Emini pulled back on Tuesday and formed the 2nd leg sideways to up on Thursday. Thursday gapped up at the open but there was no follow-through buying and closed as a bear bar with a prominent tail below. Friday gapped down but closed as a bull doji with a long tail below.
- Last week, we said that traders will be monitoring if the bulls can create strong follow-through buying or if the Emini stalls at some resistances above such as around the February 2 high or the 50-day, 100-day or 200-day moving averages area. So far the Emini is stalling below the 200-day moving average.
- We have said that bears want the pullback (bounce) to reverse lower from a lower high or from a double top bear flag with February 16 high or February 2 high. If the bears get that, they then want a measured move down to around 3600 based on the height of the 7-month trading range. This remains true.
- If the 3rd leg sideways to down forms, but it is weak and reverses up from below the February 24 low, it would then form a wedge bottom from below the 8-month trading range. A 3rd reversal attempt has a higher probability of working.
- The bulls want this to be the start of the reversal up to re-test the trend extreme high from a lower low major trend reversal and a wedge bull flag (December 3, January 24 and February 24).
- However, the follow-through buying has been weak so far. For next week, the bulls hope for another leg higher from a micro double bottom bull flag with March 1 and March 4.
- Al has said that the buying interest has been weak so far which was likely due to the large stop loss (below February 24). The Emini may have to trade lower, probably towards the January 24 low to find more buyers. They should come in above the February low and create a higher low major trend reversal.
- Al also said that the February low will probably be the low for the next several months and possibly all year. If there is a new low in March or April, traders will likely buy it. A third reversal up would then create a wedge bottom, and that would likely be the low for many months.
- We have said that the 50-day, 100-day and 200-day moving averages are resistance above. This remains true.
- Friday was a bull doji closing near the upper half of the range. It is a high 2 buy signal setup. However, because of the small bull body, it is not a strong buy signal bar.
- Traders will be monitoring if the bulls can create follow-through buying next week, or if the Emini stalls around March 3 high, February 16 high or around the moving averages.
- The bulls need to create consecutive bull bars trading far above the February 2 high to convince traders that a re-test of the trend extreme is underway.
EURUSD Forex market
The EURUSD Monthly chart
- February’s candlestick was an OO (outside-outside) doji bear bar and was in breakout mode.
- Previously, we said that January had a bear body closing in the lower half of the range, so it was a weak buy signal bar.
- February traded above January early in the month, but there was no follow-through buying. It then broke below January late in the month but reversed to close as a doji with a small bear body.
- March triggered the bear breakout by trading below February’s low this week and is currently a big bear bar with a small tail below.
- Al has been saying that EURUSD is in the middle of a 7-year trading range and the selloff was climactic. That makes it likely to go sideways to up for a couple of months, even if it ultimately breaks below last year’s low and the bottom of the 7-year range. It traded sideways for almost 4 months.
- We have said that the bears want a continuation of the 700-pip measured move lower based on the height of the yearlong trading range (August 2020 to August 2021) to around 1.0855. This week almost reach this target.
- Another bear measured move based on the height of the 4-month trading range (Nov 2021 to Feb 2022) will take them to around 1.072 which is very close to the March 2020 low.
- The bulls want a reversal higher from below a potential final bear flag (Nov 2021 to Feb 2022). However, they have not been able to create strong bull bars since May 2021.
- They will need to create consecutive bull bars closing near their highs to convince traders that a reversal higher is underway.
- The whole sell-off from last year looks like a bear leg within the 7-year trading range.
- Al said that if Europe handles the Russian invasion of Ukraine poorly, the EURUSD could test the bottom of the 7-year range. This remains true.
- If there is a reversal up from around these levels, the 7-year trading range will be a triangle, beginning with the 2017 low.
The EURUSD weekly chart
- This week’s candlestick on the weekly EURUSD Forex chart was a big bear bar with a long tail above and a prominent tail below. It was a surprise bear breakout bar below the 4-month tight trading range.
- We have said that the EURUSD is in a tight trading range and odds of reversal are more likely than breakouts. Until there is a breakout with strong follow-through, the odds favor that breakout attempts up and down will fail and the 4-month trading range will continue.
- The bears got a strong breakout and want a 400-pip measured move down based on the height of the 4-month trading range to around 1.072. It is just 200 pips below Friday’s close.
- The bears will need another follow-through bar next week to confirm the breakout. If they get that, odds of a test of March 2020 low increases.
- The bulls hope that the 4-month trading range is the final flag of the bear leg and want the breakout below to reverse higher from a failed breakout.
- We have said that if there is a bear breakout, the bulls will make another attempt at a bottom around the March 2020 low. That would be a higher low double bottom in the 7-year range, and the current 4-month tight trading range would then be a likely Final Bear Flag. This remains true.
- Al has said that the geopolitical uncertainties (Russia’s invasion of Ukraine) could lead EURUSD to test the bottom of the 7-year trading range, especially if Europe handles it poorly.
- Since this week closed as a big bear bar near the low, odds favor at least slightly lower prices next week. Traders will be monitoring whether the bears can create a follow-through bear bar or not.
The EURUSD daily chart
- The EURUSD closed below the January low on Thursday followed by a follow-through bar on Friday.
- There is a 10-bar bear microchannel which means relentless selling.
- The bears got the breakout they wanted and want a 400-pip measured move which will take them to around 1.072. They are just 200 pips shy of this target. If they get there, odds of a test of the March 2020 low increases.
- The bulls want a reversal higher from a parabolic wedge (February 14, February 24 and March 4).
- However, the selloff has been strong and in a tight bear channel. It increases the odds of a 2nd leg sideways to down after a pullback (bounce).
- Bulls are not likely to buy aggressively until there is at least a micro double bottom or a very strong bull reversal bar.
- Last week, we said that if there is a bear breakout, the bulls will likely attempt to reverse higher again around March 2020 low. That would be a higher low double bottom in the 7-year range, and the current tight trading range would then be a likely Final Bear Flag. This remains true.
- For now, odds favor at least a small 2nd sideways to down leg after a pullback (bounce).
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.
Weekly Reports Archive
You can access all weekly reports on the Market Analysis page.