Trading Update: Thursday August 26, 2021
Emini pre-open market analysis
Emini daily chart
- Emini poked above top of bull channel drawn from May 7 high on daily chart (not shown), but closed below.
- It also got to within a couple points of, and thus testing 4500 Big Round Number.
- Probably will try again today to close above both levels. When a market gets near important resistance, it usually tests it at least twice before the bulls will give up and the market reverses.
- Bulls want big breakout above, and then an even stronger bull trend. That happens 25% of the time, and it happens because traders who have been selling for the past 20 – 30 bars (days) finally give up.
- 75% of the time, a breakout above the top of a bull channel fails by about the 5th bar. However, those 5 bars can still be still very big, and therefore there is a reasonable chance of a sharp rally over the next week.
- If the bears get a reversal down within a week, it will be from a higher high major trend reversal and from an expanding triangle that began with the July 26 high.
- Even though strong rally for 5 days, each day has had at least a couple hours in a trading range. Traders will expect at least some trading range trading today, whether or not there is a bull or bear trend.
- The bears want a reversal down into the end of the month because they would like a bear bar on the monthly chart. The open of the month is about 100 points down and there are only 4 trading days left in August. At the moment, a bear close is not likely, but surprisingly big moves are more common at the end of a month.
- Not only do the bears want a bear bar on the monthly chart, they want it to have a big bear body. That means they want the month to close 50 or more points below the open, which is even less likely.
- August will probably be the 7th consecutive month with a bull body on the monthly chart. That has only happened twice before in the 25-year history of the Emini.
- If it does, then September should be a bear bar because there has never been a streak of 8 consecutive bull bars in the 25-year history of the Emini. Every streak eventually gets broken, but since that happens rarely, it is more likely that September will be a bear bar.
Emini 5-minute chart and what to expect today
- Emini is down 5 points in the overnight Globex session.
- After 5 days without a pullback, there will probably be a pullback within the next few days. A pullback is a day with a high below the high of the prior day.
- Most recent days were bull bars on the daily chart, but had a lot of trading range trading on the 5-minute chart. Traders should expect at least a couple hours of sideways to down trading at some point today.
- With only 4 trading days left in August and with the Emini overbought and at the top of its bull channel, traders should be ready for a surprisingly big move up or down before the end of the month. Will it happen? I said “surprisingly.” If it was likely, it would not be a surprise, but be ready just in case. A big day can go much further than what seems reasonable in the middle of the day.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday was outside up day that closed above Tuesday’s high, but small body and lower high in bear channel that began on June 25..
- Yesterday was 4th consecutive bull day.
- I said last week that this week should rally and that it could be the end of the 4-month bear trend.
- Traders are deciding if the low is in for the next month or two, or if the rally will form a double top with the August 13 high. If the EURUSD turns down from here, it would be a lower high double top with the August 13 high, and be another lower high in the bear channel.
- The more bull bars closing near their highs, the more likely the Emini will work up to the July 30 high and maybe the June 25 high over the next month.
- If the bears get consecutive bear bars closing near their lows over the next few days, there will probably be a test of this week’s low or the November low at the bottom of the yearlong trading range.
- At the moment, traders will buy the 1st 1- to 2-day pullback unless that pullback is a pair of big bear bars.
- Today so far is the 3rd consecutive day with a small body. That is a loss of momentum and it increases the chance of a 1- to 3-day pullback.
- If the pullback does not have consecutive bear bodies closing below their midpoints, there should be a higher low and a 2nd leg up. If it does, there will probably be a new low and a test of the November low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Wedge bottom on the open, then major bear Surprise Bar and breakout to far below yesterday’s low.
- After micro wedge bottom and lower low major trend reversal, bulls got strong reversal back up to above yesterday’s low (not shown).
- Big Down, Big Up made trading range likely.
- There was a midday reversal down from a 2nd leg up, and the bear trend resumed down to a small new low.
- After another lower low major trend reversal and a High 4 bottom, the Emini entered a tight trading range in the final hour.
- Today closed near its low, but it was a bear channel. A bear channel is a bull flag since 75% chance of a break above the bear channel tomorrow.
- Now only 40 points above open of month with 3 trading days remaining in August. Bears want bear body on monthly chart so Emini might get drawn down there by end of month.
- The bulls want the month to close on its high, which would increase the chance of higher prices in September.
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.