Emini 3 day island bottom might become 5 day island bottom
Pre-Open market analysis
Yesterday was a broad bull channel day and it closed on its high. Also, if tomorrow gaps up, there will be a 5 day island bottom in addition to the current 1 and 3 day island bottoms. Since this is buying pressure, it would increase the chance of a test of the EMA and the November 16 minor lower high.
The bears want the 2 day rally fail around the 20 day EMA. However, after 2 bull bars closing near their highs, the bears will probably need a micro double top before they can resume their bear trend. Consequently, the Emini will probably be sideways to up this week.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. It will probably gap up, which will create a 5 day island bottom. The bears will try to close the gap. They often try on the open. If there is a selloff, traders will pay careful attention to what happens near yesterday’s high. The bulls will try to create a reversal up. However, the bears want to close the gap. In addition, they want today to close below yesterday’s high and on the low of the day.
Because of the 2 bull days and the island bottom, the odds favor another bull trend day today. If the bears conclude that the bulls are in control, they will give up. This could create a big bull trend day today or soon.
After 2 bull days closing near their highs, the bears will probably need a micro double top before they can resume the bear trend. Therefore, traders will buy the 1st reversal down. This will limit the downside for the rest of the week.
EURUSD Forex bear channel forming head and shoulders bottom
The EURUSD daily Forex chart hast soled off 600 pips since September. But, it has been sideways for a month. The bears want the bear trend to resume. They need a strong break below the November 12 low. Yet, the 7 day selloff has lacked consecutive big bear bars. It therefore looks more like a bear leg in the month-long trading range than a resumption of the bear trend.
If the bulls can get a reversal up this week, they will have a higher low major trend reversal. It would also be a head and shoulders bottom. In general, a major bottom has a 40% chance of leading to an opposite trend. More often, it leads to a swing up in a trading range. It sometimes simply quickly fails and the bear trend resumes.
Trading ranges resist breaking out. Therefore, a break below the November low will probably reverse up. However, a break above the November high and 1.1500 will probably stall around the October 16 lower high.
The lack of momentum over the past week makes another trading range day likely today. Since the bulls need a good buy signal bar, they will try to get the day to close near its high. The bears always want the opposite and will try to get the day to close near its low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 20 pip range for the past 5 hours. This makes it difficult even for scalpers to make money.
The location is good for the bulls. In addition, the micro wedge down over the past 7 days is likely to reverse up. But, until there is a bull breakout above the micro wedge, the 7 day bear channel is still intact.
Because the micro wedge selloff follows a strong rally up to November 20, the odds favor at least a couple days up this week. However, if there is a strong bear breakout, traders will sell.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini tested yesterday’s high, but the bulls kept the gap open. The huge mid-day bull breakout was big enough to make higher prices likely for at least another day or two, even if there is a deep pullback 1st.
The Emini should test the November 16 lower high within a few days. By going above last week’s high, this week totally reversed last week’s selloff on the weekly chart.
On the monthly chart, at a minimum, the bulls want November to close above its open. It would therefore be a buy signal bar for December.
See the weekly update for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.