Trading Update: Thursday July 22, 2021
Emini pre-open market analysis
Emini daily chart
- Yesterday saw Emini follow-through buying after Monday’s big bull reversal.
- Since yesterday had a bull body, it confirmed the reversal. That increases the chance of at least a small 2nd leg sideways to up after the 1st pullback.
- There is now a 50% chance of a new high. That means that there is still a 50% chance of a lower high.
- A lower high would lead either to a bear trend or a trading range. A trading range is always at least slightly more likely.
- What happens if there is a new high next week? The bulls want the bull trend to continue forever. That is not going to happen.
- The next reasonable targets are the measured move up from the 3-month trading range at 4,404, the top of the bull channel at around 4,500, and the measured move up based on the height of the pandemic crash at 4,537.
- The Emini has been sideways in July. Trading ranges resist breaking out. Therefore, there might be more sellers than buyers at the new high, which would be a break above the trading range.
- I have been saying that July will probably have a bear body on the monthly chart when July closes next Friday. It could make a new high and then sell off to below the open of the month before the month ends next Friday.
- The more the reversal up continues, the more likely the bulls will get a 6th consecutive bull bar on the monthly chart. That has not happened in 10 years. Therefore, a 7th consecutive bull bar will be even more unlikely, which means August would then probably have a bear body.
- While it is less likely after the 2-day rally, the bears still have better than a 50% chance of creating a bear body in July. The Emini is not too far above the open at the moment. Also, next Wednesday’s FOMC announcement is a catalyst. It could lead to a big move up or down, and that means there is the potential for a move down below the open.
Emini 5-minute chart and what to expect today
- Emini is unchanged in the overnight Globex session.
- Monday was a strong bull trend. Trends tend to weaken as they progress. Yesterday was also a bull trend, but it was in a bull channel, which is a weaker trend.
- A bull channel usually behaves like a bear flag in that a breakout is more likely to be below the channel than above.
- That increases the chance of a swing down today, which would break below yesterday’s bull trend line.
- A bull channel typically evolves into a trading range. The market usually has to go sideways at least 10 – 20 bars before the bears can get a trend reversal.
- Even if there is a trading range today, the odds are still greater that the 2-day bull trend will resume for at least one more leg sideways to up than it is that it will reverse.
- So what should traders expect for today? While a trend up or down can always happen, the loss of momentum yesterday increases the chance of at least a couple hours of trading range trading today. Also, today will probably be sideways or down after 2 big bull days in a month-long trading range.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Consecutive wedge bottoms since June 18. That increases the odds of a break above the month-long bear trend line and then a rally up to the July 9 lower high. The rally could reach the June 25 high over the next few weeks.
- Today triggered buy signal, but so far is a small bear day. It has been a trading range day on the 5-minute chart.
- A buy signal in a tight bear channel is low probability. Many bulls will wait to buy until they see a couple big bull bars or a breakout above the EMA.
- Until then, odds favor at least slightly lower prices.
- Sideways for 4 days, which increases the chance of more sideways, possibly until Wednesday’s FOMC.
- If today closes near its low, it will be a Low 1 sell signal bar for tomorrow. But after 4 sideways days and consecutive wedges, it would be a weak signal, just like yesterday was a weak buy signal. That means sideways is more likely than up or down.
- The bears want the month-long tight bear channel to continue to below the March low, which is also a measured move target. Because of the wedge bottom, they would like a collapse below the bottom of the bear channel to below that March low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Trading range day for the 1st half of the day.
- Strong rally at midday from a higher low double bottom with yesterday’s strong rally.
- Closed on the high so possible gap up tomorrow.
- Only 20 points below all-time high so might make new high tomorrow.
- If so, then this week will be outside up week. That would increase chance of higher prices next week.
- Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour.
- The open of the week is probably too far below to be a magnet.
- Last week’s high is the all-time high and that is an important magnet.
- The more the week closes near its high and above last week’s high, the more likely next week will trade higher.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 S&P Emini futures 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 charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.