Emini outside down bar in parabolic wedge sell climax
I will update again at the end of the day.
Pre-Open market analysis
I have been saying since Friday that the 8 day bear micro channel probably would end today or tomorrow. By today trading above Friday’s high, there is now a pullback and the micro channel on the daily chart has ended.
But, I also said that a micro channel is a sign of strong bears and that the 1st reversal up would probably only last a day or two before there was a test back down. Yesterday sold off strongly to below Friday’s low and formed an outside down day. That might be the end of the test.
While the selling could continue today, there is a parabolic wedge sell climax on the daily chart. Therefore, the odds still favor a minor reversal up this week.
Minor reversal up should begin this week
Because of the extreme sell climaxes of the past 3 weeks and now the parabolic shape, the odds favor a rally for the next week or two. It might have begun yesterday. If so, today could be a bull inside day. That means that there is an increased chance of an early selloff that reverses up, and the day then closes above the open. If so, today would be a buy signal bar for tomorrow.
If instead today is a bear inside day, today would be a sell signal day for tomorrow. However, you can see how violently the bulls bought below Friday’s low. Many bulls will buy again if today or tomorrow falls below yesterday’s low.
While the odds are that the 1st reversal up will be minor, the Emini will probably need a double bottom before this selloff will end. Therefore, even if there is a strong reversal up this week, there is still a 50% chance of a test down to the February low before the correction ends.
Overnight Emini Globex trading
The Emini is up 13 points in the Globex session. Since yesterday was a sell climax, there is a 75% chance of at least a couple hours of sideways to up trading that starts by the end of the 2nd hour. It might have begun with yesterday’s late reversal up. But, there is also a 50% chance of at least some resumption of selling within the 1st 2 hours as well.
Because yesterday was an outside day that closed in its middle 3rd, today will probably mostly overlap yesterday’s range. There is only a 25% chance of a big bear day.
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 micro double bottom and nested parabolic wedge bottom
The EURUSD daily Forex chart triggered a weak sell signal today by trading below yesterday’s low. The selloff is now in a nested parabolic wedge at the bottom of a 6 month trading range.
The EURUSD daily Forex chart has almost completely reversed the rally from the August 15 low. However, the 5 week selloff did not yet fall below that low. Therefore, it can still be just a deep pullback from the 2 month rally. Furthermore, trading ranges resist breaking out. Consequently, even if this selloff continues below the August low, there is a 60% chance that it would soon reverse back up into the 6 month trading range.
Since yesterday was a bear inside day in a 6 week bear trend, it was a sell signal bar. However, it had a prominent tail below and the day before was a bull reversal day. In addition, today so far is not a big bear day. Moreover, the signal is just above the support of the August low. Finally, the chart has a nest wedge bear channel. That is a sell climax pattern and therefore there is a 50% chance of a reversal up beginning this week.
If there is a reversal, it would probably be like all of the other reversals over the past 6 months. Traders would expect 2 – 3 weeks up to test the 20 day EMA and either the October 22 or the October 16 highs.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 40 pips overnight in a wedge bear channel. By breaking below yesterday’s low, it therefore triggered the weak sell signal on the daily chart.
Because the overnight selloff has been weak and in a wedge bear channel, there is an increased chance of a reversal up today or tomorrow. If that were to happen, the bulls would have a micro double bottom on the daily chart. If today closed near its high, it would be a buy signal bar on the daily chart for a micro double bottom, a double bottom, and a nested wedge bottom. Traders would then look for a rally over the next 2 weeks.
While the 6 week bear trend has fallen over 400 pips, it is losing momentum at the bottom of the 6 month trading range. It could still break strongly below the August low, but it appears to be trying to reverse up.
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 formed a bull inside day today, as expected. Today is therefore both a buy and sell signal bar for tomorrow. After the parabolic wedge sell climax and today’s bull close, the odds favor a rally for 1 – 2 weeks. Therefore, there will probably be more buyers below today’s low and above today’s high tomorrow.
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.
Trading Room
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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.
