Emini and Forex Trading Update:
Friday May 21, 2021
Pre-Open market analysis of daily chart
- Yesterday was a 2nd consecutive big bull bar, and a good follow-through bar after Wednesday’s strong reversal up from a double bottom bull flag.
- Last Friday’s high is the neckline of the double bottom bull flag. The bulls need closes above that high, for traders to look for a measured move up, based on the double bottom. That target is above the all-time high of 2 weeks ago.
- The Emini has been sideways for 6 weeks, which is typically neutral.
- It is slightly more likely to have a bull breakout than a bear breakout. This is because last week reversed down from a failed breakout above the range, and then up from a failed breakout below. A 2nd failed breakout has a better chance of leading to a trend.
- The trading range is 200 points tall. Traders are therefore looking for a measured move up or down.
- If today is a 3rd consecutive big bull day, which is unlikely, traders will be more confident that the bull trend is resuming, even though the Emini is still in its 6-week trading range.
- The bears want a reversal down from a double top with the neckline of the double bottom. It today is a big bear day, it would reduce the bullishness. The bears need a break below the trading range to switch the odds in favor of a measured move down.
- If today reversed down from below last Friday’s high, the Emini might form a triangle. There would then be a lower high after Wednesday’s higher low. The bears would then have close to a 50% chance of a break below the 6-week trading range.
- If today has a small bear body, the odds will continue to favor a breakout above the range.
- After 2 big bull days, today probably will not be a 3rd consecutive big bull day. This is especially true since the Emini is still in its 6-week trading range.
Weekly support and resistance
- Today is Friday, so weekly support and resistance can be important.
- After the strong selloff early in the week, the Emini yesterday got back above the open of the week (but closed just below it). That is the most important magnet on the weekly chart.
- A close above, especially far above, would increase the chance of higher prices next week. This week would then be a good High 1 buy signal bar.
- The bears would need a close near the low of the week, for traders to expect lower prices next week. That is unlikely.
- A close in the middle of this week’s range, would increase the chance of a 3rd consecutive sideways week.
Overnight Emini Globex trading on 5-minute chart
- After 2 big bull trend days, the odds favor more trading range trading today.
- However, if the 2-day rally is a resumption of the yearlong bull trend, the bulls should be able to create mostly bull bars on the daily chart.
- In bull trends, many days rally in the final hour, to create a bull body on the daily chart.
- Bulls want today to break above the May 14 high, and to close above that high.
- Bulls want today to close above the open of the week.
- The more today closes near the high of the day, and of the week, the more likely the Emini will go higher next week.
- The bears want a bear bar today. Today would then be a sell signal bar on the daily chart, for a double top with the May 14 high.
- The bears want a strong bear trend from the open, which is unlikely.
- If there is an early rally, the bears will try for a midday reversal down.
- If there is an early trading range, the bears will try for a bear breakout.
- Today will probably have a lot of trading range price action. That means there should be at least one swing up, and one swing down.
- If there is a series of strong trend bars up or down in the 1st hour, today could be a strong trend day, but that is unlikely.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Micro double top with high from 2 days ago.
- Turning down today from nested wedge rally to double top.
- If today closes in bottom third of range, then reasonable sell signal bar for Monday.
- 4-day tight trading range and 8-week tight bull channel, increase chance of more sideways instead of major reversal.
- Target is 1.20 area, since Big Round Number, middle of 4-week range, around 50% pullback, and top of March 11 breakout point.
- Bulls need consecutive closes above February 25 high for successful breakout. Then, will try for break above January 6 high, which is top of 2-year range.
Overnight EURUSD Forex trading on 5-minute chart
- Strong reversal down 2 hours ago, after small break above yesterday’s high.
- Sell climax forming micro double bottom just below yesterday’s low, and bottom of 4-day trading range.
- Selloff could simply be test of bottom of that range.
- Bears want break below yesterday’s low. Today would then be outside down day.
- Bears want today to close below yesterday’s low, which would increase the chance of reversal down.
- Bulls want today to close in middle third of range. That would reduce the chance of lower prices on Monday.
- Bulls want today to close above midpoint of week, which would increase chance of sideways to up next week.
- Since 4-day tight trading range in strong rally, odds are against much lower prices today.
- Probably will begin to form trading range, and traders will fight over close of day and close of week.
- Unless series of strong trend bars up or down from here, traders will look for reversals.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Low 2 top and then bear channel.
- Midday reversal up from measured move targets and 60-minute EMA.
- Entered trading range around open of week for several hours. It closed exactly at the open of the week.
- Trend resumption down into the close after an expanding triangle and wedge top.
- Because today closed near the low, it is a sell signal bar for Monday for a double top with the May 14 high. However, it had a prominent tail below and is therefore a weak sell signal bar.
- Today’s selloff on the daily chart is more likely a pullback from the break above May 14 than the start of a trend down from a double top lower high major trend reversal.
- However, if there is strong selling early next week, the odds for the breakout from the 6-week trading range will flip and favor the bears.
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 opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.