Trading Update: Wednesday December 22, 2021
Emini pre-open market analysis
Emini daily chart
- Yesterday was big bull day closing near its high.
- Monday was 1-day island bottom at bottom of bull channel, just below the September 2 high, and just above 100-day MA and December 3 low. It was also a test of the 4500 Big Round Number.
- Bulls hope this is start of rally with new high before year end.
- Bears hope this is 2-day pullback in reversal down from double top (Nov 22/Dec 16).
- Bears want reversal back down from 20-day EMA and 50% pullback of selloff from Dec 16 high.
- If there is a reversal from a lower high, the trading range will be a triangle where Nov 22 is the 1st high.
- Trading range for 7 weeks so Breakout Mode, which means the probability of a successful bull breakout is about the same as for a successful bear breakout.
- I have been saying that odds slightly favor a bull breakout to a new high either in December or early 2022.
- However, if the bears get consecutive closes below December 3 low (neckline of double top), odds will shift in favor of measured move down and test of October low.
Emini 5-minute chart and what to expect today
- Emini is down 5 points in the overnight Globex session.
- Yesterday was a buy climax day. It ended with a potential expanding triangle over the final 2 hours.
- Since yesterday was a buy climax day, there is a 75% chance of at least a couple hours of sideways to down trading today starting by the end of the 2nd hour.
- With all of the abrupt reversals over the past month, traders should not be surprised if today is a big bear day, despite yesterday being a big bull day.
- If today is a bear day, the daily chart will be in a triangle. That would make the chart back to around 50-50 (it is currently slightly more bullish).
- If the bulls are going to close the year at a new high, there probably will be mostly bull days for the remainder of the year. That means if the Emini is below the open in the final hour, traders should be ready for a rally back above the open.
- If the Emini begins to form mostly bull days, that will increase the chance that the next day will be another bull day.
- The more bear days over the next few days, the less likely the Emini will make a new high this year.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Today so far is a small bull day.
- The EURUSD is in the middle of a 4-week tight trading range, so Breakout Mode. Since yearlong bear trend, bear breakout is slightly more likely.
- Bears want bear breakout and resumption of yearlong bear trend. They then want a measured move down.
- Next target for the bears is June 19, 2020 higher low, which was 1st pullback in last year’s strong rally.
- Bears then want trend to continue down to below bottom of 7-year trading range. They have a 30% chance of achieving that before there is at least a 2-month rally.
- Bulls want 4-week tight trading range to be a base that leads to a rally back up to the middle of the 2021 bear trend. They need consecutive bull bars closing near their highs and above the November 30 high at the top of the 4-week tight trading range.
- If there is a bear breakout, it will probably fail within a few weeks and reverse up. Tight trading range late in bear trend is usually Final Bear Flag.
- Might reverse up from double bottom with June 19, 2020 low (weekly chart, not shown) and a measured move down based on height of 4-week tight trading range.
- In middle of 7-year trading range. Legs in trading ranges are often strong, but do not typically go from top to bottom without a bounce. That is why a 2-month rally is likely before the selloff breaks below the bottom of the 7-year trading range.
- Traders should expect a 2-month rally to begin soon, either from the current 4-week tight trading range or from a reversal up from a break below the the range (which would then be the Final Bear Flag).
- Currency reversals have an increased chance of happening at the start of a year. The current bear trend began on January 6. If there is going to be a reversal, traders might wait for early January.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Bull Trend From The Open.
- Entered a trading range after 90 minutes.
- Midday reversal down from a higher high major trend reversal.
- Had at least 3 bars with lows below the EMA and at least one bar closing below the EMA, which happens 99.5% of all days.
- After wedge selloff, bulls got trend resumption back up to a new high at the end of the day.
- With today closing near its high in a bull trend, there is an increased chance of a gap up tomorrow. Also, there is an increased chance of an outside up week.
- Near top of 7-week trading range. If reversal down tomorrow, then the trading range will be a triangle. That does not change anything because the daily chart is already in Breakout Mode.
- The odds are greater for a new high before a test of the October low. The odds will increase more if the bulls keep adding more bull days.
- There is a 50% chance of the rally reaching 4800 – 4850 at top of channel before the end of the year.
- The bulls want the new high in December and then a gap up in January on the daily, weekly, monthly, and yearly charts.
- The Emini could easily stay sideways through the end of the year.
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.