Emini bears will probably not get Christmas bear trend
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off on Friday in a bear channel. Last week was a bear bar on the weekly chart and it closed below the prior week’s low. The bears are tyring to close the year on its low, below the February low.
But, the Emini is near the bottom of a yearlong trading range. Also, the close of last year is a magnet. The bulls might get a rally back to it in the final days of the year.
While the momentum down on the daily chart is good for the bears, the location at the bottom of the yearlong trading range is good for the bulls. Trading ranges resist breaking out. The Emini will probably finish the year above the February low and below last year’s close. Since the Emini is at the bottom of its trading range, the odds favor a rally back to the middle and possibly the top over the final 2 weeks.
Overnight Emini Globex trading
The Emini is down 6 points in the Globex session. It will therefore open as a continuation of Friday’s bear channel. But a bear channel is a bull flag. The odds favor a bull breakout. In addition, channels on the 5 minute chart rarely last more than 3 days. Consequently, the odds favor at least a 20 – 30 point rally today or tomorrow.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
EURUSD Forex double bottom higher low major trend reversal setup
The EURUSD daily Forex chart has been in a trading range for 2 months. The month-long triangle had a bull breakout and then a bear breakout. There is now a double bottom higher low major trend reversal (DB HL MTR) buy setup.
The EURUSD daily Forex chart has been sideways for 2 months. Trading ranges resist breaking out. There is always both a bear setup and a bull setup. Most fail to lead to a breakout. Instead, the trading range keeps adding bars and forming new patterns.
The month-long triangle has evolved into a double bottom higher low major trend reversal. If today closes near the high of the day, it would be a buy signal bar for tomorrow.
A major trend reversal setup has a 40% chance of leading to a swing trade. The minimum goal is a test of the October 16 high and a 2nd leg up from the November 12 low.
But, there is a 60% chance that either the trading range or the bear channel (lower highs) will continue. Since the reward is at least twice the risk, if today closes near the day’s high, this would be a reasonable buy setup.
Overnight EURUSD Forex trading
The EURUSD rallied 50 pips overnight. Because the bulls want a good buy signal on the daily chart, they will buy 20 – 30 pip selloffs today. Some will hold part of their position for a test of the November 1.15 high or the October 1.16 high.
The bears want the 3 month bear channel to continue. They do not want today to become a good buy signal bar. They therefore will sell rallies and try to make today close be at least below its midpoint.
However, the overnight bull channel has been tight. As a result, the bears have not even been able to make 10 pip scalps. They need deeper pullbacks before most day traders will begin to sell.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
The big story today is that the Emini broke below the February low. Today is therefore the new low for the year, even though it closed slightly above the old low.
The bulls want a strong reversal back up to the close of last year by yearend. However, as I wrote over the weekend, this year will probably close down. I also sad that the Emini will probably close above the February low.
Today’s momentum down increases the chance of the year closing on its low.
But, the Emini is only slightly below the February low. A minor bounce this week or next will result in a close above the February low.
Can the Emini close the year below the monthly bull trend line below 2400? Unlikely because that is far below and there are only 9 trading days left In addition, the week between Christmas and New Year’s is typically quiet.
Today was the 5th consecutive bear trend day on the daily chart. That is unusual and therefore climactic. Also, today was the 3rd day in a bear channel. A 4th day is rare. The bulls will probably get a bull body tomorrow or Wednesday.
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.
Trading Room
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Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.
