Trading Update: Wednesday November 10, 2021
Emini pre-open market analysis
Emini daily chart
- Monday was a sell signal bar for a parabolic wedge reversal buy climax that was testing the top of the 6-month bull channel.
- Yesterday triggered the sell signal by breaking below Monday’s low. Since yesterday closed below its midpoint and below Monday’s low, and it had a big bear body, today should trade sideways to a little lower.
- Because the bull trend has been strong, this reversal down is probably minor. That means it should last only a few days before the bulls buy again.
- There are now 3 consecutive bear bars. That is enough selling to usually lead to a 2nd leg sideways to down.
- A parabolic wedge buy climax typically also has at least a small 2nd leg sideways to down.
- Consequently, even if the bulls buy again today or tomorrow, the reversal up will probably only last a day or two.
- With the bulls looking to buy the selloff and the bears looking to sell the 1st bounce, the Emini will probably be mostly sideways for a few days. With the buy climax on the daily chart being as extreme as it has been, the Emini could enter a trading range for a couple weeks.
- Yesterday is a High 1 buy signal bar in a strong bull trend. But since at least a small 2nd leg down is likely and it is the 3rd consecutive bear bar, there will probably be sellers not far above yesterday’s high.
- Can these 3 bear bars be the start of a 15% correction? Of course, and a correction is becoming increasingly likely.
- However, I have been saying since the pandemic crash that it is more likely that every reversal down will be minor than the start of a bear trend. That is true here as well.
- One of these reversals will eventually lead to a correction, but picking which one is a low probability bet.
- The bears will need several more big bear bars before traders conclude that a correction might be underway.
Emini 5-minute chart and what to expect today
- Emini is down 15 points in the overnight Globex session. It will gap below yesterday’s low.
- If there is a gap down and it is small, it will probably close within the 1st hour.
- The bears want a 4th bear day. If there is a series of bear bars early in the day, today will more likely continue yesterday’s trading range and bear channel.
- If the bulls get a series of early big bull bars, today could be a bull trend day. However, today will have a difficult time getting much above yesterday’s trading range high.
- Trading ranges are magnets, and that increases the chance of either a trading range or a continuation of yesterday’s broad bear channel, which traders will trade like a trading range.
- Because the sell climax was extreme and yesterday was the 3rd consecutive bear day, the sellers might be exhausted. This increases the chance of a continuation of yesterday’s trading range.
- The bears want a resumption down from yesterday’s early selling and the bulls want a trend reversal up.
- But 3 big down days after a strong rally creates confusion. Yesterday’s trading range might not have lasted long enough for traders to bet relentlessly on either direction.
- Unless there is a series of strong trend bars in either direction, traders will look for reversals.
- Even if today is a trading range day, there should be at least one swing and probably two.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Turning down from double top bear flag with November 3 high. Three consecutive bull bars so lower probability sell signal.
- Tight trading range for 8 days so Breakout Mode.
- Traders are deciding if the selloff will continue down to the March 9, 2020 high at around 1.15 or reverse up from a lower low major trend reversal.
- The tight trading range is a sign that the EURUSD is neutral.
- However, since the tight trading range is in a bear trend, the odds slightly favor a bear breakout. This is especially true since the March 9, 2020 high is an important magnet below.
- Even if the EURUSD continues down to 1.15 or 1.14, it should begin a reversal up for 2 or 3 months soon.
- Traders will need to see several big bull bars before they conclude that a rally has begun. Until then, the odds slightly favor a test below 1.15 before the reversal up will begin.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- The strong rally on the open stalled at the 60-minute EMA and the top of yesterday’s trading range.
- After a couple hours, the Emini sold off in an Endless Pullback that evolved into a very strong Small Pullback Bear Trend.
- There was a late short covering rally.
- On the daily chart, there are now 4 consecutive bear bars, which is a lot. It reduces the chance of a bear bar tomorrow.
- The 4-day selloff came after a strong rally on the daily chart. This creates a Big Up, Big Down, Big Confusion pattern, which typically leads to a trading range. Therefore, there is an increased chance of sideways trading for a few days.
- Is this the high of the year? It might be, but there have been many other attempts at a bear trend reversal and all have failed. Therefore, the odds continue to favor higher prices.
- After the extreme buy climax, the Emini might go sideways for a week or two.
- The bears need more bear bars before traders will conclude that a correction is underway. Traders will continue to bet on new highs until there is a clear, strong reversal down.
- The bear bar on the monthly chart in September was the 3rd attempt to end the rally from the pandemic low. I said at the time that the bear bar should lead to a 2nd bear bar in a month or two. That means the bears will try to create a bear bar in November. If they are successful, it will probably lead to lower prices in December.
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.