Emini ignoring Trump’s Obamacare repeal plan
The Emini sold off below yesterday’s low on the open. The bulls want a reversal up. Yet, the channel down from yesterday’s high was tight. Therefore, the 1st rally will probably be minor. Hence, the odds are against a strong trend up for at least an hour or two.
While the bears continued yesterday’s late selling, the Emini is at the 2 day low. This means it is an area where it rallied twice over the past 2 days. Despite the strong momentum down from yesterday’s high, this is support.
This creates confusion and therefore increases the odds of a trading range for the 1st hour or two. In addition, the Emini has had mostly trading range price action for a month. Finally, this open is consistent with today being mostly a trading range day.
The final hour will be important because it affects the appearance of the bar on the weekly chart. The bears will try to have the week close on its low to create the 1st strong sell signal bar on the weekly chart this year. The bulls will try to have it close well above the low to make it a weak sell signal bar.
Pre-Open market analysis
The Emini had a weak reversal up yesterday after a 2 day broad bear channel on the 5 minute chart. The bulls see the daily chart as having a 3 day pullback from a new high. They therefore see yesterday as a High 1 bull flag. Yet, after 2 bear bars, there is a 50% chance that there are sellers than buyers above yesterday’s high.
While the bulls are still in control, the weekly chart is extremely overbought. At the moment, the weekly chart is a doji bar. Today is Friday and therefore weekly support and resistance is important. At the moment, this week’s open is the most important price. The bears want the week to close below Monday’s open. That would there create a bear sell signal bar for next week. Hence, if next week trades below this week’s low, it would trigger a sell signal on the weekly chart. The weekly moving average is a strong magnet. However, the bears still need a strong entry bar if the reversal will be the start of the move down to the moving average.
Overnight Emini Globex trading
I said on Wednesday that yesterday would probably break above the 2 day bear channel and then test down. Furthermore, I said the bulls would then try to create a major trend reversal up from Wednesday’s low. That is what they will try to do today. Yet, because yesterday’s selloff was strong, the bulls will probably need at least a small double bottom before they will be able to try to reverse the Emini back up.
The bears want a strong break below the June 9 bottom of the 3 week range. Because the weekly chart is so unusually overbought, that breakout can come at any time. When it does, it probably will create a big bear trend day.
Since most days over the past month have been trading range days, the odds are that today will be another one. Yet, almost every day has had at least one 2 – 3 hour swing. This is likely again today.
EURUSD Forex market trading strategies
While the 240 minute EURUSD Forex chart broke above a 5 day wedge bottom, the breakout is weak. Therefore there is only slightly better than a 50% chance that the bull trend has resumed. There is close to a 50% chance that the 5 week correction is still underway.
If it is, the bears will try to break below the May 30 bottom of the range. At the moment, they have a 30%chance of a strong bear breakout, that will test down to around 1.0850 at the top of the November to April trading range on the daily chart.
More likely, whether or not the selloff falls below the May 30 bottom of the range, the bull trend will resume. This would result in a break above the November 9 major lower high. However, this would still only be a rally within the 2 year trading range. Therefore the odds favor a bear leg lasting several months and a continuation of the range. Until there is a breakout, there is no breakout. There is an 80% chance that every strong rally and selloff will reverse.
You can go back and read my notes during the early May rally and the late May selloff. Both looked like they were strong enough to lead to breakouts. In both times, I made the same point about reversals being more common than breakouts in trading ranges.
Overnight EURUSD Forex trading
While I did not show it on the chart, the 4 day rally has a wedge shape on the 240 minute chart. The bears want it to be a wedge bear flag. Furthermore, they want it for turn down from a double top with the June 19 major lower high.
This rally has been weak. It therefore looks more like a bull leg in a trading range than the start of a new leg up. Without a strong break above the June 19 high, the EURUSD will turn down again and try to fall below the bottom of the 5 week range.
Since the 4 day rally is weak, it is probably minor. Hence, it is more likely just a small leg up in the 4 day range. All major lower highs (and lows) are magnets. This rally is now only 20 pips below the June 19 high. Therefore it is probably close enough to be unable to escape the magnetic pull. Therefore, the odds are that the EURUSD will test a little higher over the next couple of days.
Yet, because the daily range has been small for 4 days, day traders will continue to scalp until there is either a strong break above the June 19 high or a strong reversal down from there.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini closed below the open of the the week. It therefore formed a bear sell signal bar on the weekly chart. Yet, it had a prominent tail, which makes it less bearish. Next week, bears will sell below this week’s low, looking for a move down to the weekly moving average over the next month or so.
Today was a buy signal bar on the daily chart. Since it was a doji, it is a weak signal and sideways is more likely.
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.