Emini deciding between a new high or October low test

Trading Update: Monday December 6, 2021

Emini pre-open market analysis

Emini daily chart

• Friday was a big outside down day and the 3rd sideways day. That increases the chance that today could be sideways again.
• If today is an inside day, there would be an ioi (inside-outside-inside) pattern on the daily chart. That is a Breakout Mode pattern. Today would then be both a buy and sell signal bar.
• The bulls had a 7-day micro wedge as of last Wednesday, and it is in a support zone.
• It was around a 50% pullback, the 50-day and 100-day moving averages, the November low (December triggered a sell signal when it traded below the November low), just below the September 2 high (the breakout point of the October rally), and almost down to the bottom of the bull channels on the daily (around 4443) and weekly charts (around 4470).
• Friday broke slightly below that micro wedge bottom, but reversed up into the end of the day.
• A breakout below a wedge bottom has a 50% chance of failing and reversing up, and a 50% chance of continuing down. If it continues down, a reasonable target is a measured move based on the height of the wedge, which would be down around the October low.
• Is there a 50% chance of a correction down to the October low before there is a new high? Not yet, but a couple big bear bars this week would make it likely.
• There are several gaps in the October rally that are also magnets below, but the October low is the most important magnet. That is almost exactly a 10% correction.
• Selloffs tend to stop at certain percentages down from the high, like 1%, 2%, 5%, 15%, and 20%. That means they get drawn to those numbers. That is another reason why the October low is so important.
• If the Emini gets there, it will officially be in a correction. The definition of a correction is a 10% selloff. The definition of a bear trend is a 20% selloff.
• I have said a few times that if the Emini gets to the October low, it will probably rally for a month or two. The bulls will hope for a double bottom and then a new high.
• However, if it rallies from the October low, it will probably form a lower high and turn down again. Then traders will begin to talk about a head and shoulders top.
• Only about 40% of head and shoulders tops lead to bear trends (and about a measured move down).
• A head and shoulders top is a trading range and usually a triangle. A continuation of the trading range or a resumption of the bull trend happens 60% of the time. But a 40% chance of a bear trend is enough for traders to be prepared for a bigger selloff.
• I have been saying that the Emini might just go sideways before deciding between going up to the high or down to the October low. When the chart is not clear, it usually goes sideways. It could be sideways for a few days or for a month or two.
• At the moment, the chart is not clear. The Emini has been reversing every day or two.
• But consecutive big bull bars would be clearly bullish, and consecutive big bear bars would be clearly bearish.

Emini 5-minute chart and what to expect today

• Emini is up 24 points in the overnight Globex session.
• Friday’s low is a lower low double bottom with Wednesday’s low.
• The bulls want the reversal up that began at the end of Friday to continue up above Friday’s high, which is the neckline of the micro double bottom. They then want a measured move up to the all-time high before the end of the month.
• The bears want any rally today or tomorrow to fail at or below Friday’s high. They then want a break below the double bottom and a measured move down to near the October low.
• The Emini has been sideways for 3 days. That increases the chance of today being another sideways day.
• Friday was a sell climax day. There is a 75% chance of at least a couple hours of sideways to up trading that starts by the end of the 2^nd hour.
• Because of the double bottom at a cluster of support on the daily chart, there is an increased chance of a bull trend day today.
• After 4 big bear days and a failure to break through support, there is a smaller chance of a big bear day today. But if there is a series of big bear bars early in the day and a break below Friday’s low, then traders will look for a bear trend day.
• Today will most likely be sideways or up.

Friday’s Emini setups

Here are several reasonable stop entry setups from Friday. 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

• Trading range for 3 weeks so Breakout Mode. Today so far is a small bear inside candlestick, which is a continuation of the trading range.
• Thursday triggered a Low 2 and a double top sell signal (Nov. 10/Nov. 30), but there has not been follow-through selling. There is no sense that the price is terribly wrong.
• Traders are deciding if there will be a higher low reversal and a measured move up to the October 27 high, or a break below the November low, which is the neckline of the double top, and then a measured move down.
• Friday was a bull doji bar, which is a weak buy signal bar for a High 1 in a Small Pullback Bull Trend.
• The bulls want a measured move up to the November 9 top of the most recent sell climax.
• The probability is about 50% for each. Also, there is a 50% chance that the 1st breakout up or down will fail.
• It is important to remember that the EURUSD is in the middle of a 7-year trading range. Also, the selloff was climactic. That makes it likely to go sideways to up for a couple months soon, whether or not it ultimately breaks below last year’s low and the bottom of the 7-year range.
• On the weekly chart, last week triggered a buy signal for a failed breakout below a bear channel.
• Last week was a doji bar with a small bull body. This is not yet a clear reversal up.
• As I said, there will probably be a trading range lasting a couple months starting soon. The past 2 weeks had prominent tails, which is often an early sign of a trading range. There might be another brief leg down before the bear trend transitions into a trading range.
• Less likely, the bear trend will continue down in a tight bear channel to below last year’s low.

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

End of day summary

• After a 2-bar sell climax on the open, the Emini reversed up in a Small Pullback Bull Trend From The Open.
• There were 2 tight trading ranges lasting at least 10 bars. That reduced the chance of the trend lasting all day.
• The Emini reversed down from a buy climax just above yesterday’s high.
• Every day has at least a 99.5% chance chance of at least one close below the EMA, which the bears got late in the day.
• The last selloff was a test of the top of the early tight trading range.
• Because the daily candlestick had a prominent tail on top, today is less bullish than it might have been.
• The odds are still slightly higher that the rally will go back to the old high before there is a reversal down to the October low. However, one or two big bear days closing below the Friday micro wedge low would make a test of the October low likely.

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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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.

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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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