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Emini bulls want rally to new high before year end

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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

Emini wedge and High 2 bottom at EMA then small pullback bull trend. Bulls want rally to new high before year end.

Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

EURUSD Forex in middle of 4 week tight trading range in bear trend so possibe Final Bear Flag
  • 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

Emini small pullback bull trend from the open then 20-gap bar buy and trend resumption up

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.

Trading Room

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.

  • Hello Al, Does the 99.5% statistic apply to the bull case also, i.e. bars with highs above the EMA ? Thanks.

  • Hi Al,

    You’ve marked on today chart a 20-Gap bar buy, but the bar is above the moving average not bellow. You’ve also marked a “99.5% chance of at least 3 bars with lows bellow EMA”. I don’t think I’ve read anything about this in the course. Where can I read a more detailed explanation about this? Thank you.

    • The low of bar 39 is just below the EMA. Your computer might be using a slightly different calculation.

      I have talked many times in the chat room about how every day has a 99.5% chance of having at least 3 bars with lows below the EMA and at least one close below the EMA. I also have many examples in my Encyclopedia of Chart Patterns. I do not remember if I put that in the course. I tried include everything I could think of, but I am sure I missed a few things.

      • Thank you for reply Al. I thought the gap bar definition requires the high of the bar to be bellow the moving average. Quote:

        “moving average gap bar (gap bar)
        A bar that does not touch the moving average. The space between the bar and the moving average is the gap. The first pullback in a strong trend that results in a moving average gap bar is usually followed by a test of the trend’s extreme. For example, when there is a strong bull trend and there is a pullback that finally has a bar with a high below the moving average, this is often a buy setup for a test of the high of the trend.”

      • Sorry Al. It seems I am confusing 20 Gap bar with Gap bar definitions. I’ve found in your book the correct definition:

        “Once you become aware that 20 consecutive gap bars are present, look to fade all touches of the moving average.”

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