Market Overview: Weekend Market Analysis
The SP500 Emini futures bulls got a breakout above the 4-week trading range on Friday. Trying to resume the Emini yearlong rally. They want Monday to be another bull bar, which would confirm the breakout and make higher prices likely. The bulls want a 100-point measured move up, based on the height of the 4-week trading range.
The EURUSD Forex market formed an outside up bar this week. That makes at least slightly higher prices likely. But it has been sideways for 9 months. The trading range should continue for at least a couple more months. Any move up or down in May will probably only last a couple weeks.
EURUSD Forex market
The EURUSD weekly chart
- This week triggered a sell signal by trading below last week’s low.
- It then traded above last week’s high and became an outside up bar.
- It closed above last week’s high and had a big bull body. This makes at least slightly higher prices likely next week.
- Next target is the February 25 lower high. The bulls want a breakout above that high, and a test of the January 6 high.
- Bears want a double top reversal down from that February 25 high.
- Alternatively, the bears want next week to be a bear inside bar, which would then be an ioi (inside-outside-inside) sell signal bar.
- Or, if next week trades above this week’s high, they want a reversal down, which would also be a sell signal bar. The bears currently have a 30% chance of getting a good sell signal bar next week.
- Bears want 2nd leg down from January 6 wedge top. They currently have 40% chance of reversal down to November 4 low, before breakout above January 6 high.
- In trading range for 9 months. Trading ranges resist change. Probably will remain in trading range for at least another couple months. This is true whether the rally continues up to the January 6 high, or there is a reversal down to the November 4 low.
S&P500 Emini futures
The Monthly Emini chart
- May so far is a small bull bar, and it is at a new all-time high.
- There is no top yet so traders continue to expect at least slightly higher prices.
- If May remains a bull bar, it will increase the chance of higher prices in June.
- If May is a bear bar, it would be a possible end of the 3rd leg up from the pandemic low. The 1st two legs ended in September and January.
- A reversal down from here would be from a micro parabolic wedge top.
- That is a buy climax, and traders would expect at least a couple small legs sideways to down.
- Because the pattern is a micro pattern, the reversal will probably be minor.
- Therefore, once there is a reversal, it should last for only 2- to 3-months.
The Weekly S&P500 Emini futures chart
- This week traded below last week’s low, and then above its high. This week was therefore an outside up week, which is bullish.
- This week closed above last week’s high, which is also bullish.
- But its body was small, and therefore this week was not as strongly bullish as it could have been.
- There is a measured move target at 4,244.00, which is just above this week’s high. It is based on the June 5, 2020 high, which was tested twice (September and again end October).
- Closed near the high of the week, so might gap up next week.
- Small Pullback Bull Trend since pandemic low last year.
- A Small Pullback Bull Trend rarely lasts more than about 60 bars. Therefore, the bull trend will probably soon have a pullback, and transition into a trading range.
- 1st reversal down should be minor.
- The best the bears will probably get is a trading range for 2- to 3-months.
- 60% chance that once a correction forms, it will be 10%.
- 40% chance it will be 20%.
- The bull trend is so extreme that even once it resumes after a pullback, it might have a hard time getting much above the previous high. Therefore, the Emini could begin to form a broad trading range that could last many months.
- If the Emini enters a trading range for 10 or more bars, and there is a reliable sell signal, there would be a 40% chance of a major trend reversal.
- That means into a bear trend, and not just a trading range.
- A bear trend on the weekly chart means at least a few months of selling, and a retracement of about half of the yearlong rally.
- In summary, overbought bull trend, but the Emini should reach the measured move target above at 4,244. Also, there is no sign of a top. The 1st reversal down should be minor, even though the reversal could be the start of a trading range that could last for a few months.
The Daily S&P500 Emini futures chart
- There was a streak of 8 consecutive bear bars that ended on Thursday.
- Since that has happened only twice in the 23-year history of the Emini, it was extreme and climactic.
- Because the Emini was sideways for 4 weeks, it was a Breakout Mode pattern.
- Thursday’s strong reversal up was followed by a bull bar on Friday. Friday confirmed the reversal and it makes at least slightly higher prices likely next week.
- Consecutive big bull bars closing near their highs is a Bull Surprise, which typically will have at least a small 2nd leg up. Therefore, the bulls will buy the 1st 1- to 3-day pullback.
- Friday was also a breakout above the 4-week trading range.
- Monday is the follow-through bar. If it is a bull bar, especially a big bull bar closing near its high, it would increase the chance of a rally that could last a couple weeks. Traders would look for a 100-point measured move up, based on the height of the trading range.
- If Monday is only a small bull bar, it will make at least slightly higher prices likely next week.
- If Monday is a bear bar, especially a bar closing near its low, traders will conclude that Friday’s breakout failed. They would then look for the 4-week tight trading range to continue.
- Tight trading range late in a bull trend usually is the Final Bull Flag. That increases the chance that a rally from here will reverse down within about 5 weeks.
- A reversal down, whether or not there is a measured move up, could be the start of a 10% correction.
- There have been many reversal attempts since the March low. All failed within a few days.
- While a 10% correction is likely this summer, picking the exact top is a losing strategy. It is always more likely that the Emini will resume up after every reversal attempt.
- The bears need consecutive big bear bars before traders will conclude that the 10% correction is underway.
- In a bull trend, a correction is not clear until it is already half over.
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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.