Emini inside bar after buy climax at October lower high
Pre-Open market analysis
After a big bull day on Wednesday, yesterday was a small, bull inside doji day. It is therefore a buy signal bar on the daily chart. Because the rally was strong and yesterday had a bull body, there are probably more buyers than sellers below yesterday’s low. However, it is a weak sell signal bar for a double top bear flag with the October 17 high.
The bears want a reversal down from the double top. But, the reversal up from the October low has been very strong. Therefore, the odds are that the Emini will go at least 10 – 30 points above that high within the next week.
The bears will probably need at least a micro double top before they can get a reversal. Even when they do, the bulls will buy the 1st 1 – 3 day selloff.
Today is Friday so weekly support and resistance are important, especially in the final hour. The most important prices are the October 17 major lower high, the high of the week, and the 20 week EMA. Last week’s high is far below and unlikely to be important today.
Since the weekly chart is in a trading range, there is an increased chance of disappointment for trend traders. For example, the bulls had a strong 2 week rally. A close 50 points below this week’s high would create a big tail on the top of the weekly candlestick and disappoint the bulls.
Overnight Emini Globex trading
The Emini is down 16 points in the Globex session. If it gaps down, it would create a 2 day island top. But, small gaps typically close in the 1st hour. In addition, yesterday had a bull body and therefore is a weak sell signal bar. Consequently, the odds are against a big bear day. Any selloff today will probably just add bars to the bull flag on the 60 minute chart and not create a bear trend.
The bulls are exhausted from Wednesday’s rally. They might need 2 – 3 days of sideways to down trading before they will again try to break above the October 17 high. This increases the chance of mostly trading range price action today.
EURUSD Forex testing bottom of trading range after wedge bear flag
The EURUSD daily Forex chart has sold off for 3 days from a bear flag at resistance. They want the selloff to break strongly below the August/October double bottom. The August low is also the neckline of the 500 pip tall July/September double top. A measured move down would be 1.08 over the next several months.
However, the daily chart has been in a trading range for 6 months. Trading ranges resist breaking out. Consequently, if the bears get their breakout, it will probably fail within a few days. There is support around 1.12. A reversal there would be from a wedge bull flag on the weekly chart, using the November and August lows. But, if the bears get a series of bear bars closing on their lows, the breakout would then likely fall at least 200 more pips. Traders would then start thinking that 1.08 was possible.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight after yesterday’s selloff. If the bulls can rally today, today would then be a buy signal day for Monday. The pattern would be a double bottom pullback.
Alternatively, if the bears can get today to close below last week’s low, this week would be an outside down week. This would create a sell signal bar on the weekly chart. In addition, it would be a break below the August/October double bottom. Even if today closes near its low, it would be a sell signal bar on the daily chart.
Importance of today’s close
Since the 5 minute chart has been sideways, day traders are scalping. But, today is unusually important. A rally would create a buy signal bar on the daily chart. But, a close near the low will create a sell signal bar on the weekly chart. A close below last week’s 1.1301 low would create a stronger sell signal bar on the weekly chart. These possibilities could affect the next several weeks. There is therefore an increased chance of a breakout up or down today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off in a bear channel on the open. As was likely, the bulls got a reversal up later in the day. However, they were unable to close the day above the open. Today is therefore a bear day, which is a weak High 1 buy signal for Monday.
The bears want a gap down on Monday. That would create a 3 day island top. However, island reversals are minor candlestick patterns. The strong rally this week make it more likely that the 2 day reversal down from the September/November top will be a bull flag.
When the bears have a bad sell setup and the bulls have a bad buy setup, the Emini usually has to go sideways for a few days.
I will be speaking in Las Vegas on Tuesday, and I will not make a daily post again until Wednesday. However, I will write a weekend update tonight.
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.
Would it be reasonable to expect that after this sharp rally that we follow that up with an upward sloping channel?
I assume that you are talking about the 2 week rally on the daily chart. While the bulls would like a Spike and Channel bull trend, and that is a common pattern when there is a strong reversal up, the daily chart will probably stall around the October 17 major lower high. If it pulls back for a week or two, it might then channel up to a new all-time high. However, The chart over the next few weeks will probably look more like a trading range than a strong bull trend. Several months from now, in hindsight, it might look like a Spike and Channel bull trend.
I guess one could look at the weekly SPY chart and say that it had a spike down from the all time high and we can now look for a continuing channel down from this rebound to new lows for the move.