Emini minor reversal up from October parabolic wedge sell climax
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up yesterday, but was unable to create a big bull bar. This week’s rally is due to exhausted bears, as evidenced by the parabolic wedge bottom. While the bulls hope the rally will last for the rest of the year, it more likely will be a leg in a trading range for a couple of weeks. It will then decide between a test of the February low and the all-time high. The best the bulls can probably get over the next 2 weeks is a test of the October 17 major lower high of 2819.25.
Although the bears want this rally to quickly fail, most bears are exhausted. They therefore will wait for a couple small legs up to either the 20 day EMA or the September 19 high before selling again.
While yesterday is a sell signal bar in a bear trend, it is also in the middle of a 2 week trading range after a sell climax. This generates confusion and makes more trading range price action likely over the next few days.
Will the selloff continue down to the February low? At the moment, there is a 50% chance. But, if this week’s reversal up begins to form a series of bull bars, then the Emini will probably go sideways to up for the rest of the year.
The daily chart has begun a minor reversal up. That increases the chance of more bull days than bear days for the next few days.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. It will open near yesterday’s low and yesterday is a sell signal bar on the daily chart.
Since the October selloff was strong, the Emini should fall below yesterday’s low and trigger the sell signal today. But, because of the sell climax on the daily chart, there will probably be buyers above this week’s low. Traders will look from a reversal up from support. That support is yesterday’s low, Tuesday’s high at the bottom of the gap, the close of 2017, and a 50% pullback of the 2 day rally.
Tomorrow is Friday and the bulls will try to get the week to close above the open of the week. The week then would be a buy signal bar on the weekly chart.
There is always a bear case, but the 3 day reversal up has been strong. The odds are that any swing down will only last a day or so before the bulls buy it and create a higher low.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
EURUSD Forex double bottom and parabolic wedge bottom
The EURUSD daily Forex chart reversed up strongly overnight from a double bottom and a nested wedge bottom.
During every strong rally and every strong selloff for the 6 months, I have said the same thing. Trading ranges resist breaking out. Any strong move up or down has an 80% chance of reversing.
The EURUSD daily Forex chart reversed up strongly overnight from a double bottom with the August 15 low. Furthermore, there is a nested wedge bottom. That increases the chance of a rally over the next 2 weeks.
The 1st targets are the 20 day EMA, the October 9 low breakout point, and a 50% retracement of the October 16 selloff. Next, the bulls will try to create a higher low and then test the October 16 major lower high.
There is always a bear case, and it always has at least a 40% chance of success, as it does here. The bears hope that the overnight rally will fail around the 1st targets, lead to a bear flag, and reverse strongly below the August low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 100 pips overnight. Because that is about the same size as other big days, there probably will not be much higher prices today.
This especially true since the rally has had 3 legs up in a tight channel. It is therefore a parabolic wedge buy climax. The bulls typically become exhausted and the rally evolves into a trading range. That is therefore likely today.
Since the daily chart has a credible bull trend reversal, day traders know that the probability favors higher prices over the next week. They therefore will be more aggressive in their buying than selling. Consequently, they will focus on finding buy setups and they will be more willing to swing trade.
The bears should not sell until the rally begins to go sideways. That should happen over the next 2 hours. In addition, their 1st shorts will be scalps because the strong rally is unlikely to reverse into a strong selloff on the 5 minute chart today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
The Emini reversed up from just below yesterday’s low, but was unable to break above yesterday’s high until just before the close. Tomorrow is Friday and the bulls will try to get the week to close near its high. That would create a good buy signal bar on the weekly chart for next week. After the wedge bottom on the daily chart, the odds favor at least slightly higher prices next week. However, because the rally is probably part of a trading range, the bulls have a higher chance of being disappointed by the weekly close.
The bears want a gap down tomorrow. That would create a 2 day island top. In addition, they want the week to close below the open of the week and the close of last year.
Since island tops are minor reversal patterns, there will probably be buyers not far below yesterday’s low. The bulls should get at least a small 2nd leg up after their wedge bottom.
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.
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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.
