Emini might form November monthly chart bear bar, or could be bear trap

Trading Update: Monday November 29, 2021

Emini pre-open market analysis

Emini daily chart

• Friday broke below the November 10 low, which is the neckline of the November 5/November 22 double top. Emini may form a monthly chart bear bar for November.
• While Friday closed well below that support, there was a conspicuous tail below. The bears will need strong follow-through early this week before traders will conclude that this is the start of a move down to the October low.
• The selloff was strong enough for traders to expect at least a small 2^nd leg sideways to down.
• The Emini will probably dip below the September 2 high before the bulls can get a new high. That was the breakout point for the October rally, and with all of the trading range trading in August and September, a strong selloff should continue at least to a little below the breakout point. That would also be about a 50% pullback from the rally up from the October 4 low.
• The bears want a measured move down, and then continued selling down to the October low.
• If they were to get that, there would probably be a bounce from that support. If there was then another reversal down from a lower high, there would be a head and shoulders top. September 2 would be the left shoulder and November 22 would be the head.
• A major sell signal has a 40% chance of leading to a major trend reversal (here, into a bear trend). There would still be a 60% chance of the Emini continuing sideways or resuming up.
• The bulls are hoping Friday is just a 2^nd leg bear trap in a strong bull trend. They will need a bull bar closing near its high today or tomorrow to convince traders that the Emini will make a new high before the end of the year.

End of the month and end of the year

• Tuesday is the final trading day in November. When October formed a big bear bar, I said that there should be a 2^nd consecutive bear bar within 2 months. The Emini is back to the open of the month, and November might become that 2^nd bear bar.
• If the bears get a bear bar, especially one with a reasonably big bear body and close near its low, November will be a good sell signal bar on the monthly chart. Traders will look for a reversal down from a failed OO buy signal.
• Remember, September and October were consecutive outside bars, which created an OO Breakout Mode pattern. The buy triggered when November traded above the October high. If November forms a good bear reversal bar, it would be a reasonable sell signal bar for a failed OO buy signal. That would increase the chance of December trading down.
• I said that a bar often reverses right before it closes and tests some significant price. On the monthly chart, Friday tested the open of the month.
• It is important to understand that the test could lead to a sharp reversal. Therefore, traders should not be surprised if November rallies sharply over the next 2 days and closes back near its high, despite the big selloff and only having 2 days remaining in the month.
• I want to make a point about the yearly chart, which I will post in early January. The year opened on its low and it is now at its high.
• Most big bull bars have conspicuous tails on top. It usually comes from a pullback just before the bar closes.
• That is why I have said several times in November that there was an increased chance of a reversal in December. Bars often change their appearance just before they close, and what happens in December is just before the 2021 bar closes on the yearly chart.
• The computers know this tendency. The bull computers will try to overwhelm the bear computers and get the year to close on its high. Therefore, there is an increased chance of a big move in either direction in December.
• If the year closes on its high, there will be an increased chance of higher prices early next year.
• But if December is a bear bar closing near its low on the monthly chart, the new year will probably trade down.
• Is this the start of a correction? I have said many times that the Emini has been in a strong bull trend on the daily, weekly, and monthly charts since the pandemic crash. There have been a few times when the bears got the probability of a correction up to 50%, but never more. If there is follow-through selling early this week, this will be another one of those times.
• I have also said that the probability of higher prices has been between 50 and 60% during this entire bull trend. It has never been below 50%. That continues to be true.
• The strong selloffs like in September push the probability for the bears up to 50%. But every prior reversal has failed, and the bears never had better than a 50% chance of a trend reversal.
• If the bulls get a strong reversal up this week, the probability of a new high by the end of the year will be again back to 60%.
• The next few days should give traders an idea of what will happen in December.

Emini 5-minute chart and what to expect today

• Emini is up 38 points in the overnight Globex session. It will gap above Friday’s high.
• Whether or not today gaps up, if it opens near the high of a big bear day, there is an increased chance of an early low of the day and then a big bull day.
• While it is possible that today will be another big bear day, it is less likely now that it is opening near Friday’s high.
• If today closes below its midpoint, it will be a reasonable follow-through day after Friday’s collapse. It will be a Low 1 sell signal bar on the daily chart.
• If it is a big bull day, the Emini will probably rally in December, and the year still might close at a new high.
• With Friday being mostly sideways, the Emini could get stuck in Friday’s range and oscillate around the open of the month, and then wait for tomorrow when November ends to decide if November will have a bear bar on the monthly chart. Friday would then simply have been a test of the open of the month.
• If today is a sideways day, the open of the day could be a magnet at the end of the day. If there is a bull body, the bigger it is, the more likely tomorrow will trade high.
• If today is a big bull day closing near its high, the Emini might rally strongly through the end of the year.
• What about omicron? Mostly irrelevant. The selloff started a week before it made the news. The selloff was technical. It was simply a test of the open of the month, and it would have happened with or without omicron. Omicron was the excuse for the market to do what it was going to do.
• If not omicron, then something else would have been the excuse… inflation, China, Russia… you pick.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

• Today so far is a bear inside day.
• Friday reversed up from a parabolic wedge sell climax over the past 7 bars on the daily chart.
• I have been saying that the EURUSD has been in a support zone for a few weeks and that it will probably reverse up for at least a few weeks. Most likely, it will form a trading range for at least a couple months, and last week could be the start of the transition from a strong bear trend into a trading range.
• The bulls formed a reversal bar on the weekly chart, which was a test of the June 19, 2020 low. That was the 1^st pullback from the breakout of the spring triangle and the bottom of the support zone that I have discussed many times over the past several months.
• The bears are hoping that this rally will quickly form a bear flag and continue the yearlong bear trend. If today is a bear bar closing below its midpoint, it will be a sell signal bar for a lower high double top with the November 18 high. Friday would be a bear trap.
• Because last week reversed up strongly on Friday from a failed breakout below a bear channel on the daily and weekly charts, traders should expect at least a couple legs sideways to up on the daily chart.
• If those legs are strong, there could be a rally back to the October 28 high.
• If the reversal is more sideways, there could be a new low. However, with the chart in a 7-year treading range, traders still expect a couple months of sideways to up trading to begin soon.
• There is only a 30% chance that this selloff will break strongly below the 7-year trading range.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

End of day summary

• After 2-legged pullback to the EMA and yesterday’s trading range high, the Emini rallied in a tight bull channel (Small Pullback Bull Trend) to just above the 60-minute EMA.
• The high of the day was a measured move up from the low to the open. The low is always important. When a rally stops at a measured move that is based on the open, then the open is also important and a magnet later in the day. That often leads to a test of the open late in the day.
• Friday was a test of the open of the month and today rallied strongly. That increases the chance that November will close above the open of the month and have a bull body. Traders will expect higher prices in December.
• On the daily chart, today had a small bull body. It opened around Friday’s open, and Friday was a big bear day.
• That combination usually means there are lots of trapped bears. It often leads to a swing up, like on June 21, July 20, and October 28 of this year and March 24, 2020.
• This increases the chance of a rally into the end of the year. The odds would be better if today was a big bull day. The odds will go up more if tomorrow is another bull day.
• The bears are still hoping for November to have a bear body on the monthly chart. But with the Emini now about 50 points above the open of the month and tomorrow being the final day of the month, November will probably be a bull bar.
• While unlikely, if tomorrow collapsed and November finished with a bear body, December would probably trade down.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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