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The bulls got a trend from the open bull trend that rallied to last week’s low. Yet, the Emini stalled there. Therefore, last week’s low will be a magnet all day. Since there is a 3 day Big Down, Big Up pattern, a trading range is likely soon. Furthermore, it could last for several hours.
The bears are trying to form a wedge top. Since the rally is strong, the bears will probably need at least a micro double top. Because the bears should not have allowed this much of a rally from yesterday’s low, the odds are against a bear trend day. Since the Emini is stalling at important resistance, the odds are against much higher prices. Consequently, today will probably soon enter a trading range.
Pre-Open market analysis
Yesterday was a bull trend day and it reversed much of Wednesday’s strong selloff. Big Down, Big Up creates Big Confusion. The result is usually sideways for several days.
The bulls are hoping that Wednesday was just a pullback in a bull trend. Since the weekly chart is so extremely overbought, there is a 60% chance that the Emini is now in a swing down to below the weekly moving average.
However, yesterday’s reversal up was strong. Consequently, the bulls might again test the all-time high. Furthermore, a gap up today would create a 2 day island bottom. That would therefore be a sign of strength for the bulls. Yet, because a selloff to the weekly moving average is likely, this rally will probably form a lower high.
Because the Emini is still in a 2 month trading range, the odds are against a collapse. Consequently, any selloff will probably be in a bear channel for a month or two. It might therefore be like the September 12, 2016 big bear breakout and strong pullback back up. The Emini took 2 months to complete its selloff.
Friday, so weekly support and resistance are important
Since today is Friday, traders will look for support and resistance on the weekly chart. Those targets are often important, especially in the final hour. This week is an outside down week. The bears can demonstrate additional strength by closing below last week’s 2379.00 low. Additionally, they want this week to close on its low.
Since the bulls always want the opposite of the bears, they want today to close above 2379. That is also close to the daily moving average.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. While yesterday sold off at the end of the day, the selloff held above the bottom of the 9:05 a.m. higher low. The bulls therefore see the selloff as a bear leg in a bull channel. Since the momentum up was strong yesterday, the bulls have a 50% chance of continuing the rally up to around the 2379 low of last week.
The bears see yesterday as a 2 legged pullback in a new bear trend on the daily chart. While the odds favor a bear trend on the daily chart, the pullback might continue up before the bears take control again. Yesterday’s rally was strong enough to create confusion. Consequently, the odds favor a trading range day today.
Furthermore, since yesterday had a big range and today will probably open in the middle third of that range, today has an increased chance of being an inside day. Therefore, the bears will sell a rally that tests yesterday’s high. Additionally, the bulls will buy a selloff that tests yesterday’s low.
The swings up and down have been big. That increases the chances of big swing again today. This will be especially relevant in the final hour, which is the end of the week. Hence, there is an increased chance of a Buy The Close rally or a Sell The Close selloff at the end of the day.
EURUSD Forex market trading strategies
The 4 day strong bull breakout was extreme. Because yesterday was a bear day, the bulls are starting to take profits. I said yesterday that the bears would need at least a micro double top before they could get even a minor reversal.
Since the rally resumed up overnight, a reversal down from here would meet the requirement of a micro double top. The odds are there will be sellers above yesterday’s high. Consequently, the EURUSD will probably pull back for at least 3 days. Furthermore, the pullback will begin early next week and last at least several days. This is the opposite of what happened on November 23 during a climactic selloff.
The November 9 high is the top of a climactic bear trend. Therefore, theoretically, bears have their stops above its high. If the EURUSD does not break strongly above that high, traders will view the current rally as a bull leg in a trading range that began with that high.
Yet, if the bulls break strongly above it, they will then try to break above the May 2016 lower high and then the top of the 2 year trading range. Will they succeed? Since most trading range breakouts fail, the odds are that this rally will lead to a reversal down instead of a bull breakout above the range.
However, there is no top yet. Additionally, the EURUSD Forex market is so close to the November 9 high that it probably cannot escape its magnetic pull. Consequently, even if the EURUSD pulls back for a couple of weeks, the odds are that the pullback will be a bull flag and not a trend reversal. Hence, the odds still favor higher prices over the next few weeks.
Overnight EURUSD Forex trading
The EURUSD rallied 80 pips in a tight bull channel overnight. Therefore, bulls will buy the 1st 30 pip selloff on the 5 minute chart. However, the rally on the 240 minute chart is climactic. Therefore, the bulls will soon take profits above prior highs.
Since the rally is above yesterday’s high, the bulls will begin to take profits. Additionally, bear scalpers will begin to sell above yesterday’s high. As a result, the odds favor a trading range over the next several day. The 1st target for any pullback is yesterday’s low.
While is has been much easier to make money as a bull this week, bear scalpers will also start to make money over the next several days. Furthermore, the bulls will start taking profits earlier.
As a result of traders looking to buy low, sell high, and take quick profits, the EURUSD 240 minute chart will probably evolve into a trading range within the next couple of days.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Last week was a sell signal bar on the weekly chart. While the Emini traded far below last week’s low, it rallied strongly and closed back near that low. The week was a big outside down doji. Next week will probably be an inside bar. Therefore next week will probably have several trading range days.
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.