Emini August rally testing bull channel top

Trading Update: Monday August 9, 2021

Emini pre-open market analysis

Emini daily chart

• Friday was a small bull bar so weak follow-through after Thursday’s breakout to a new high, testing bull channel top.
• Thursday’s breakout was small.
• Bulls want 60-point measured move up based on 10-day trading range.
• Top of wedge bull channel on daily chart, based on May 7 and July 14 highs, is just above 4,450. It is a magnet above.
• Bears want reversal back down to bottom of 10-day tight trading range (possible Final Bull Flag).
• Since Friday was a doji bar, it is a weak sell signal bar.
• Even if bears get bear day today, bulls have been buying every 1- to 3-day pullback for over a year, and they will buy a reversal down this time as well.
• August or September should be a bear bar on monthly chart. Once there is a bear bar, there will probably be a 2- to 3- month correction of 15 to 20%

Emini 5-minute chart and what to expect today

• Emini is down 7 points in the overnight Globex session. It therefore might open close to Friday’s low.
• If there is a gap down, it should be small. Most small gaps close in the 1^st hour.
• I have been saying since late July that August would probably trade above the July high since the trend on the monthly chart is strong and July closed near the high of the month. August broke above the July high last week.
• But I have also been saying that the breakout might be small and lead to a reversal down for a few months since the streak of 7 consecutive bull bars on the monthly chart should end in August or September.
• Friday’s small range is a sign of hesitation and uncertainty. Traders have not yet decided if the breakout will succeed. That increases the chance of more hesitation today, which means more sideways trading.
• Friday formed a triangle on the 5-minute chart. That is a Breakout Mode pattern. If there is a breakout today, the probability is only slightly higher for the bulls.
• Furthermore, there is about a 50% chance that the breakout will fail.
• Finally, when there is a breakout from a triangle, there is usually a test of the apex of the triangle before the trend goes far. Consequently, even if there is a strong trend up or down today, there will probably be a test of the apex of the triangle within a few days.

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

• Friday was big bear day in reversal down from July 6/July 30 double top bear flag.
• Bears want breakout below July 21 low, which is neckline of double top.
• They want 150-pip measured move down, which would be just above the November low at the bottom of the yearlong trading range.
• The bears then want a break below the yearlong trading range and then a measured move down to last year’s low at around 1.06.
• Trading ranges resist breaking out. Therefore, there probably will be buyers around the November low.
• Bulls want reversal up from lower low double bottom with July low. They need big bull bar this week to attract buyers. They probably will need a micro double bottom after Friday being a big Bear Surprise Bar.
• Since now at July low where EURUSD went sideways for 6 days, increased chance of trading range for a few days.
• Traders are deciding if Friday is start of new leg down or just a sell vacuum test of July low. They need more information, which means more bars.
• If there is another big bear bar in the next few days, the selloff should continue to 1.16.
• If there is a big bull bar this week, then the July trading range will continue, or the reversal up will begin a move up to the June 25 major lower high.

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

End of day summary

• Consecutive big bear bars on the open formed Major Bear Surprise. That made strong bull trend unlikely.
• Reversed up from below yesterday’s low and 60-minute EMA (not shown).
• Rally continued for 5 hours.
• Trending bull closes began with bar 52. Sign of buying pressure and it led to buy vacuum test of high of day.
• On daily chart, today is High 1 buy signal bar in strong bull trend, but bear body so weak buy signal.

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

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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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