Trump’s White House shakeup is catalyst for correction
The Emini opened around the open of the week, which will probably be a magnet all day. This is especially true in the final hour. Yesterday’s reversal creates confusion and makes traders cautious. They prefer to buy low, sell high, and take quick profits. Consequently, a trading range day is likely, probably straddling the open of the week.
Most days have had trading range opens lately. In addition, today opened at the magnet of the open of the week. Furthermore, it is in the middle of the week’s range. Finally, it began with a reversal. While a swing up and down are likely today, the Emini looks like it might take an hour or more to decide which will come first. The Emini is Always In Long, but without a strong break above yesterday’s lower high, the odds favor a trading range open.
Pre-Open market analysis
The Emini reversed down strongly yesterday from a parabolic wedge top on the daily charts. While there is also a parabolic wedge top of the monthly chart, it is unlikely that July will close below its open or last month’s low in its remaining 2 days.
The weekly buy climax is historic and the odds therefore favor a pullback to 20 – 50 points below the weekly moving average. It is likely to begin soon. Today is Friday, and if the week closes near its low, it will be a sell signal bar on the weekly chart. That would increase the chances that a 100 – 150 point pullback is underway.
The most important price today is the open of the week. The Emini closed yesterday just above it. The bears want today to close below it to create a bear body on the weekly chart. Hence, that would be a stronger sell signal bar. The bulls always want the opposite. It will probably be a magnet all day today, and especially in the final hour.
Yesterday’s selloff was strong enough so that the bulls will probably need at least a micro double bottom before they will buy. If instead today is a 2nd consecutive big bear day, that would make the daily chart Always In Short. In addition, that would make it more likely than not that the 2 – 3 month correction is underway.
Since the reversal up in the 2nd half of yesterday was exceptionally strong, it created a Big Down, Big Up environment. The odds therefore favor sideways for the next several days. Furthermore, it erased much of the bearishness of the early selloff.
Overnight Emini Globex trading
The Emini is down 6 points in the Globex market. Because yesterday’s late reversal up was strong, the chart has a Big Down, Big Up pattern. That creates Big Confusion, and confused traders are cautious. Then tend to buy low, sell high, and scalp. Therefore a trading range day is likely today.
Yet, yesterday showed that both the bulls and bears can create strong trends. Consequently, if there is a strong breakout up or down, or a good reversal pattern, day traders will swing trade. Even if there is a trading range, the legs will probably be big enough for swing traders.
EURUSD Forex market trading strategies
The EURUSD Forex market has been in a strong bull trend for 7 months on the daily chart. Yet it is at resistance on the monthly chart. In addition, it now has an expanding triangle top on the 240 minute chart. Any reasonable top has a 40% chance of a swing down. There is a 60% chance of the chart going sideways or up. The bears want either a lower high major trend reversal, or for a breakout to a new high to fail and reverse down. They then want a test of the bottom of the triangle. If they get that, they then want a measured move down.
Trends lead to trading ranges
Although most tops fail, most bull channels evolve into trading ranges. That is likely to happen within the next month or so here on the daily chart. Because of the parabolic wedge rally, the odds are that the EURUSD daily chart will begin to pull back within a week or so. The bulls hope that the pullback will be another bull flag that leads to another strong breakout to a new high.
But, because of the buy climax at resistance, bulls will probably sell out of longs at a new high and bears will short. Hence, the odds are that the channel will soon start to go sideways and form a trading range.
Overnight EURUSD Forex trading
The 5 minute chart has rallied 70 pips since yesterday’s close. Yet, it is still within its 6 day trading range. Furthermore, bears will probably sell above yesterday’s high. While the overnight rally has been strong, it is near resistance.
Therefore, it will probably transition into a trading range over the next couple of hours. Hence, bulls buying up here have to be prepared to exit quickly if the rally begins to stall. They instead will begin to use trading range techniques, which means buy low, sell high, and scalp.
Because the 5 minute channel is tight, bears will wait for at least a little sideways trading before shorting. However, since the channel is tight, the downside over the next 2 hours is small.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini formed a bull inside day on the daily chart after yesterday’s big bear doji day. It is therefore a buy signal bar for Monday. This is the 8th day in a tight trading range. Because of the buy climaxes on the daily, weekly, and monthly charts, the odds are that the Emini will pullback for several months. Yet, there is no clear top or strong reversal down yet. Therefore, the odds favor sideways to slightly up.
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.