Emini outside up in minor reversal from sell climax
Pre-Open market analysis
Yesterday gapped down below Monday’s low. That triggered a weak Low 1 sell signal on the daily chart. As was likely, there were buyers below. Yesterday rallied above Monday’s high, forming an outside up day. But, the bulls were unable to hold above that high into the close.
I said last week that the Emini would soon trigger the sell signal on the daily chart and the buy signal on the weekly chart. It reversed down yesterday from just below last week’s high. It therefore failed to trigger the weekly buy signal. However, it is still close enough to make it likely that the bulls will get above that high within a week or two.
Nothing has changed. The strong rally on the daily chart is still a minor reversal. The odds are that the Emini will get a 2nd leg sideways to up. Then, it should fall below the December low within a month or two.
Overnight Emini Globex trading
The Emini is down 26 points in the Globex session. After yesterday’s outside up day and a 3 day tight trading range, there is an increased chance of an inside day today. The bulls will buy above yesterday’s low and the bears will sell below yesterday’s high.
Furthermore, because of the 3 day tight trading range, there might be more sellers than buyers above yesterday’s high. In addition, there are probably more buyers than seller’s below yesterday’s low.
Today has an increased chance of being the 4th consecutive trading range day. Since the daily ranges continue to be big, the legs up and down will probably be big enough for swing trades. Day traders will look for weak trends to reverse every 2 – 3 hours.
EURUSD Forex in Breakout Mode after 2 month trading range
I wrote yesterday that the wedge top and strong reversal down were good for the bears. However, I said that until there is a breakout, there is no breakout.
The chart is still in its 2 month trading range and remains in Breakout Mode. There is always a reasonable buy and sell setup. The bulls have been forming higher lows since November 12. Therefore, there is a 2 month broad bull channel in addition to the wedge top.
Both sides have been alternating control after every few days. Until there is a clear breakout, the chart is neutral and traders will bet on reversals.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 70 pips and pulled back 40 pips overnight. After yesterday’s big reversal down, the bears needed sustained selling today. So far, this is trading range trading.
The 80 pip rally makes it unlikely that the bears will be able to form a strong bear trend day today. Additionally, the 40 pip reversal down and yesterday’s big selloff make a bull trend unlikely. Therefore, today will probably continue the overnight trading range trading. Day traders will look for reversals and 10 – 20 pip scalps.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After an initial selloff, today oscillated around yesterday’s low. Although today was a trading range on the 5 minute chart, it was a bear bar on the daily chart.
Because December 24 was a bad buy signal bar, today might be the start of a test down to that high.
Tomorrow is Friday. The bulls were unable to trigger the weekly buy signal. Instead, this week so far is a Low 1 sell signal bar for next week.
Traders tomorrow will pay attention to weekly support and resistance, especially in the final hour. The bears want the week to close near its low.
While the bulls want a close above the open, that is unlikely. Alternatively, they want the week to close above its midpoint. That would weaken it as a sell signal bar for next week.
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.
Hi Al, can you please explain the reasons for the buy entry above #19 & 20? It is below 20MA and I thought it had the potential to form a DT bear flag with #11/12, so I hesitated to buy there.
I agree with the possible double top bear flag. There were 2 later in the day (42 and 61).
However, the bulls kept trying to create an Opening Reversal up. There is a reversal on 80% of days. It often comes around bar 18. It was reasonable to buy above a bull bar closing near its high. which means above 18 or 19. However, the 1st reversal up from a tight bear channel is usually minor. That meant there would likely be a reversal back down at some point.