Emini bull flag but limited upside without pullback
Pre-Open market analysis
Today is the 1st day of the month. Last month was a small bull doji bar on the monthly chart and therefore not a good sell signal bar. This is especially true due to the 7 bar bull micro channel. The odds are that traders will buy below the September low.
Last week was also a doji inside bar on the weekly chart, but it had a bear body. It is therefore both a weak buy and sell signal bar. There are probably buyers not far below and sellers not far above.
The daily chart has a 5 day tight trading range and a bull bar on Friday. Friday is a buy signal bar for today. Because the chart is in a bull trend, the odds favor at least slightly higher prices.
Traders are deciding if the September high is the start of a pullback to the 20 week EMA. If instead the Emini rallies above the September high, it would be the 3rd leg up from the August 15 low. That would create a potential wedge top on the daily chart.
Overnight Emini Globex trading
The Emini is up 13 points on the Globex chart. It will therefore probably form a big gap up on the open. A big gap increases the chance of a trend day. A gap up makes a bull trend more likely than a bear trend.
Whenever there is a big gap up, there is 20% chance of a strong trend from the open. If one forms, a bull trend is more likely than a reversal down.
When a gap is big, the Emini is far above its average price. Many traders prefer to buy closer to the average price. Consequently, the chart usually has to get closer to the 20 bar EMA before the bulls can get a strong bull trend.
There is an 80% chance of at least a small trading range forming by the end of the 1st hour. If so, day traders will look to buy a double bottom or a wedge bottom around the 20 bar EMA. Furthermore, they will look to sell a wedge top or a double top. A trend usually starts by the end of the 2nd hour.
EURUSD Forex market trading strategies
While last week’s selloff from a double top on the EURUSD daily Forex chart was strong, the bulls will probably get a higher low. The September 10 higher low and 1.15 are support, and are near the 50% pullback. Support is a magnet. Therefore, the odds favor slightly lower prices within a couple of weeks.
Since the chart is now in an early bull trend, the bulls will try for form a higher low. They would like the bull trend to resume quickly. But, the chart typically will get a 2nd leg down after last week’s buy climax at resistance. Consequently, if there is a 2 – 3 day rally this week, the bears will probably get a lower high and then a test of 1.15.
Since the daily chart is in the middle of a 5 month trading range, it could stay here for months before successfully breaking out. Therefore, traders will look for reversals after ever 1 – 2 week leg, no matter how strong.
Low 2 bear flag at 20 week EMA on weekly chart
Last week is a Low 2 sell signal bar on the weekly chart. The bulls are buying its low to prevent the weekly sell signal from triggering.
The odds favor a move below last week’s low this week, which would trigger the sell signal. But, the daily chart is in a bull trend. In addition, the 8 month selloff is probably a bull flag on the weekly chart. As a result, the reversal down on the weekly chart will probably only last 1 – 2 weeks before the 6 month trading range resumes.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 50 pips overnight from just above last week’s low. Today is forming a micro double bottom with Friday’s low. Since last week’s selloff was strong, this rally will probably form a lower high between 1.1650 and 1.17. Therefore, the bulls will take profits after any 30 – 50 pip rally and the bears will begin to sell.
The bulls would like the week to reverse last week’s selloff. Although this is possible, after a parabolic wedge top, a 2nd leg down is likely. Therefore, day traders will bet that every move up or down will not get far. They will take quick profits. Since last week was a sell climax to a support zone, the bulls will buy reversals up. With the bulls buying low and the bears selling high, this week will have a lot of trading range trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
By breaking above last week’s high, the Emini triggered a weekly buy signal. Since last week was a bear bar in an overbought bull trend on the weekly chart, it was a low probability buy setup. I pointed this out over the weekend and this morning.
By falling below Friday’s high, the Emini turned today’s gap up on the intraday charts into an exhaustion gap. This is minor on the daily chart. If this week trades below last week’s low, the week would be outside down. That would increase the chance of a test down to the 20 week EMA.
The bulls need bull bars closing near their highs if they are to break successfully above the September high. At the moment, the odds favor a pullback to the 20 week EMA, whether or not there is a brief new high 1st.
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.
Al, I think you mean to refer to SEPT in “The odds are that traders will buy below the October low” ?
In your 2nd entry today — “Friday’s gap up”, do you possibly mean “gap down” ?
You are right about September and I fixed it.
Today gapped up above Friday. I should have been clearer. By closing the gap up above Friday’s high, today’s gap up was an exhaustion gap variant. It was an exhaustion gap on intraday charts (like the 60 minute chart), but not on the daily chart.