Trading Update: Tuesday August 24, 2021
Emini pre-open market analysis
Emini daily chart
- Yesterday was the 3rd consecutive big bull day closing near its high, and at another new all-time high, with Emini testing bull channel top.
- Next target is 4500 Big Round Number, which is also around the top of the bull channel on the daily chart.
- Above that, there is resistance at the measured move at 4537 based on the pandemic crash (February 19, 2020 high to March 23, 2020 low).
- When there is a tight bull channel, there is an increased chance of a big break above the channel and then a reversal down. That is a blow-off top, and it would probably lead to at least a couple months of sideways to down trading.
- Until there is a clear top, traders continue to buy, correctly betting on higher prices.
- The bears want the month to close below the open of the month at 4408.00. There are 5 trading days remaining in August, and that is within reach.
Emini 5-minute chart and what to expect today
- Emini is up 4 points in the overnight Globex session.
- Yesterday was a buy climax day. There is only a 25% chance today will be another Small Pullback Bull Trend Day.
- In addition, there is a 75% chance of at least a couple hours of sideways to down trading starting by the end of the 2nd hour. This is true even though the 2nd half of yesterday already formed a trading range.
- The bears see a lower high major trend reversal in that trading range and hope for a break below the trading range today.
- The bears want a reversal down after 3 strong days up, but bulls will buy the 1st 1- to 3-day pullback.
- A trading range is Breakout Mode. That means there is about a 50% chance of a successful breakout up or down, and a 50% chance that the 1st breakout will fail and reverse.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- I mentioned over the weekend that the EURUSD should bounce this week. Yesterday reversed up strongly.
- If the bulls get follow-through buying today, Friday’s low could be the low for the next month. So far, today is a doji inside bar, which is not strong follow-through. However, as long as today does not have a bear body, traders will expect at least slightly higher prices tomorrow.
- If today is a doji bar or a bear bar, there might be one more new low before the bulls get a month-long rally.
- A reversal up from a new low would be from a 2nd consecutive wedge bottom (the 1st ended on July 21). That is a higher probability reversal pattern.
- The bear trend is intact as long as there are lower highs. The bulls need a strong break above the August 13 lower high before traders will believe that the bear trend might have ended.
- The bears hope that yesterday was a bull trap. They want a reversal down today and then a break below the November low over the next couple weeks. It is the bottom of a yearlong trading range. If today is a bear bar closing near its low, it will be a Low 1 sell signal bar for tomorrow. Traders will suspect that yesterday was just a failed reversal attempt (a bull trap).
- Since most trading range breakouts fail, there will probably be more buyers than sellers below that low.
- Because the EURUSD is in the buy zone at the bottom of the trading range, the odds favor a rally lasting several weeks. This is true even if there is one more new low first.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- After 3 big bull days, today was a trading range day. There were many small, tight trading ranges with small Breakout Mode Patterns (OO, ii, ioi, ledges), but none led to a big trend.
- After the 3-day rally, the bulls want Trend Resumption Up. They expect a breakout above the bull channel on the daily chart, which is around the 4500 Big Round Number and just above today’s high.
- The bears want a higher high double top with the August 16 high, but will probably need a micro double top before there is more than a 1- to 3-day pullback.
- There are 5 trading days remaining in August. So far, August is the 7th consecutive bull bar on the monthly chart, which is unusual. The open of the month is about 100 points below and therefore within reach by the end of the month.
- If the bears get a bear bar on the monthly chart this month or next, especially one with a close near the low, it will probably be the start of a 2- to 3-month pullback.
- If August is a bull bar, September should be a bear bar because there have never been 8 consecutive bull bars on the monthly chart. If it is, it will then probably be the start of the pullback.
- Until there is a strong reversal down, the bulls will continue to buy every 1- to 3-day selloff, even if the bear bars are big. That has been a profitable strategy for over a 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.
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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.