Emini has ioi breakout mode pattern near 2800
I will update again at the end of the day.
Pre-Open market analysis
After Monday being a huge outside day that closed in its middle, yesterday was likely to be an inside day. And it was. An inside day after an outside day creates an ioi (inside-outside-inside) breakout mode pattern.
Because it is at resistance and after a buy climax on the daily chart, the upside is small. There will probably be more sellers than buyers above yesterday’s high and above the October-November-December triple top.
But, since the daily chart is in a buy climax at resistance, yesterday is a reasonable sell signal bar. Traders expect about 2 weeks and 2 legs of sideways to down trading.
Since yesterday was a doji bar on the daily chart, it is a weak signal bar for the bulls and bears. Therefore, the odds favor mostly sideways trading again today. However, the Emini will probably be sideways to down for a couple weeks.
The importance of Friday’s close
The next useful information comes once this week ends. The bears want the week to close below last week’s low. That would be a strong outside down bar on the weekly chart and increase the chance of lower prices next week.
The bulls want the week to close above last week’s high. It would then be an outside up week on the weekly chart after initially being an outside down week. That would increase the chance of higher prices next week. However, as I said, the upside over the next 2 weeks is probably small because of the buy climax at resistance.
Since both the bulls and bears have reasonable arguments, this week will probably close somewhere in the middle. If it closes near its low, the week will increase the odds that a 2 – 3 week pullback is underway.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex session. It will therefore likely open within yesterday’s tight trading range. Since traders are waiting for the end of the week to see how the week closes, there is not much incentive to break strongly from yesterday’s range. Consequently, the odds are that today will continue yesterday’s price action and be another trading range day.
Obviously, the bulls want a strong rally that will undo Monday’s damage. The bears want a strong 2nd leg down. One of the two will achieve their goal within a week or two. However, the odds are that not much will happen today.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart yesterday fell into the buy zone around 1.13 yesterday. The wedge rally was strong, but it followed a strong selloff in early February. Therefore, the bulls would not continue to buy the 3 week rally without a test of the February low. This 4 day selloff is that test.
Traders expected a selloff to retrace at least half of the 3 week rally. Yesterday met that goal. The bulls will now try to stop the 4 day selloff and then rally from a higher low. After 5 bear days, they may need 2 – 3 sideways days to conclude that the selling has ended. If the bulls can get 2 – 3 bull days over the next few days, traders will buy for a test of the February 28 high above 1.14.
Since the 4 day selloff has been strong, it might continue down to the February low. It might even fall below that low. However, trading ranges resist breaking out. Consequently, there will probably be buyers below the February low.
Traders need to see consecutive closes beyond the 4 month range before they will conclude that a new trend is underway. While that is likely to happen within the next month, traders will continue to bet on reversals until it does.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight. The bears want the 4 day selloff to continue. However, the selloff retraced about half of the 3 week rally. As a result, the bulls will begin to look for reversals up from prior 5 minute lows. They prefer to see a strong move up that will allow them to swing trade. However, they know that small moves up and down are more likely. Consequently, they will be quick to take profits once they conclude that the move up from their buy is not strong.
Because the 4 day selloff has been weak, the bears will sell reversals down from rallies and not breakouts below prior low. They know that the bulls will buy around 1.13. As a result, the bears will take quick profits unless a selloff is surprisingly big.
With both the bulls and bears expecting quick profits today, today will probably be a trading range day. However, the odds favor a move above 1.1350 this week.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini sold off and tested Monday’s sell climax low. While it bounced from a slightly higher low, the rally was not strong. The double bottom with Monday’s low could lead to a trading range through Friday. Yesterday’s high might be the top and today’s low could be the bottom.
However, all that really matters over the next 2 days is the location of the close of the week. If the week closes near the low, the odds will favor lower prices for at least a couple weeks. If it closes in the middle, the Emini might go sideways before pulling back for a couple weeks.
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 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.