Emini correcting after Yellen and Trump healthcare failure
While the Emini gapped above a major lower high from yesterday, the follow-through buying was weak. Since yesterday sold off and today gapped up, there is a Big Down, Big Up, Big Confusion open. Therefore, the odds favor a trading range over the 1st couple of hours. This was likely regardless simply from yesterday’s wedge bottom.
Any day can be a trend day. However, with today opening in the middle of yesterday’s range and having an early reversal, the odds are that today will have a lot of trading range trading. Resistance is the 60 minute moving average and maybe yesterday’s high. Support is the 5 minute moving average and yesterday’s low.
Since today is in the middle of yesterday’s big range and a trading range is likely, today might be an inside day. There will probably be both a swing up and down. The Emini is currently deciding which will come first.
Pre-Open market analysis
By trading below yesterday’s low, the Emini triggered a small double top sell signal. Furthermore, it fell below last week’s low. It therefore also triggered a sell signal on the weekly chart. The bears have about a 50% chance that this is the start of a 100 point pullback to below the weekly moving average. Yet, they need strong follow-through selling. Bear trends usually begin with a big bear trend bar. Day traders will be ready to swing trade if one unfolds this week.
Since yesterday was a bear channel, it was a bull flag. Furthermore, it was a wedge. While today could have strong follow-through selling, it will more likely break above the channel and test one or both of yesterday’s lower highs. A channel usually evolves into a trading range. Hence, today will probably be a bull leg in that developing range.
Friday is the end of the month. The Emini is just above the open of the month. If the Emini closes below the open, it would have a sell signal bar on the monthly chart as well.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex market. The bulls want to rally above the bear channel and back above last week’s low. The bears want Friday to close below the open of the month. Their goal is to create a bear reversal bar on the monthly chart. Since both prices are important this week, the odds are that the Emini will stay in this area until Friday.
While there is a 50% chance of follow-through selling in the 1st 2 hours, there is a 75% chance of a trading range forming by the end of the 2nd hour. After yesterday’s wedge bottom, the odds are that today will have at least 2 legs sideways to up, lasting about half as many bars as yesterday’s selloff.
EURUSD Forex market trading strategies
Yesterday closed far enough above the November 9 lower high to be a strong bull breakout. Yet, the EURUSD market is still in a 2 year trading range. While I have been saying for several weeks that the odds favored the breakout, I also said that the breakout would still be only a bull leg in the 2 year trading range. In addition, I have been saying that the breakout would fail. What no one knows is if the breakout will fail immediately or after several more weeks and 200 more pips.
The EURUSD Forex market is in a bear trend on the monthly chart. It has been in a trading range for 2 years. There have been more than 10 attempts to break above 1.1400 and each has failed. Will this one succeed? Probably not. When a market is in a trading range, it often tries to break into a trend. And eventually it always does. However, 80% of strong attempts fail. Therefore, the odds are that this one will fail as well. Hence, the trading range of the past 3 weeks will probably be the final bull flag in the 6 month rally. The daily chart will therefore likely soon go sideways to down for at least a couple months.
Because there is no clear top yet, and a couple of the rallies in the past 2 years have gone above 1.1500, this rally might continue for a few more weeks. In addition, it might go up for even 200 more pips. Yet, the odds are that it will not go higher or last longer.
While it is possible that the daily chart could reverse down sharply, the 6 month bull trend has been in a tight channel. Consequently, the bulls will probably buy 200 pip pullbacks for a couple of months. Therefore, the daily chart will probably soon enter a 200 pip trading range that will last at least a couple of months
Overnight EURUSD Forex trading
The 5 minute chart sold off 900 pips within the past hour and then bounce 50 pips. Big Down, Big Up means Big Confusion, which means a trading range is likely for a few days. Therefore day traders will mostly scalp. They know that 1.1400 is resistance and they will therefore look to sell around there.
They also know that yesterday’s breakout was strong. Hence, they will look to buy 100 – 200 pip selloff, like they just did. Finally, they know that the EURUSD market will probably have a hard time going far up or down over the next week or so. They therefore are taking quick profits.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was a strong bull trend day. The odds are that tomorrow will either be a trading range day or a bull trend day. The all-time high is within reach tomorrow. However, since last week was a sell signal bar on the weekly chart, the bear will try to get the week to close below last week’s low.
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.