August and September are seasonally weak in Emini
The Emini reversed down from yesterday’s high with 2 bear bars. While there is still a 2 week head and shoulders top on the 60 minute chart, the bears need a strong reversal down before traders believe that they have taken control.
The 1st 2 bear bars led to a bull bar above the moving average. In addition, all 3 bars had tails below. Finally, the Emini is at the moving average and in the middle of yesterday’s trading range. This is therefore probably another trading range open. Hence, the Emini probably will be sideways for an hour or more. In addition, it increases the odds that today will be another day with mostly trading range trading. The Emini has not yet decided on the direction of the 1st swing. This open reduces the chances of a trend day.
Pre-Open market analysis
The Emini is at the top of a 9 day tight trading range. Most days continue to have reversals and lots of trading range trading. That means that today will probably have more of the same. While the bulls can get a strong breakout to a new all-time high, the odds are against a protracted leg up. This is because the weekly chart has such an extreme buy climax.
The bears have a nested head and shoulders top over the past 2 weeks. They need a strong breakout below the 9 day range to trigger an attempt at a measured move down.
Today is the 1st day of the month. The past 4 months have been strong bull bars. The monthly chart has a 9 bar bull micro channel. Since that is extreme, it increases the chance of a bear bar this month or next month. In addition, the weekly buy climax is exceptionally extreme. Yet, even if the bears get a trend down in August, the odds are that any selloff will be a pullback on the monthly chart. Hence, any reversal will probably not last more than a few bars on the monthly chart, which is a few months.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex market. The bulls are trying to get a rally above Thursday’s sell climax high and then a measured move up. The bears want a break below Thursday’s low, which would trigger a nested head and shoulders top pattern over the past 2 weeks. Since most days over the past 2 months have had at least one swing up and one swing down, that is what is likely again today. This is especially true since the Emini has been in a tight range for 9 days.
EURUSD Forex market trading strategies
The rally on the 240 minute EURUSD Forex chart is strong. Yet, it has a series of buy climaxes and then pullbacks after a couple big bull breakouts. A Spike and Channel bull trend is a buy climax pattern. It therefore typically evolves into a trading range. Since this rally has had many tests of the top of the channel, there is a 75% chance of a break below the bull trend line soon. Will there be another 1 – 2 legs up first? While it is possible, it is better for bulls to wait for a couple of legs down to below the bull trend line before buying again. Bears will start selling above prior highs and near the top of the channel. In addition, they will sell below sell signal bars at new highs. Finally, they will sell a strong reversal down.
The bears had a wedge top on the 240 minute chart on July 18. However, the bulls got a breakout to a measured move up. There is now a 2nd consecutive wedge top with the July 25 and 26 highs. When there are consecutive tops, there is a higher probability of a reversal. Since the July 31 breakout was strong, there might be one more brief leg up before a reversal down begins. However, bulls should be looking to take profits, and then waiting to buy at support. In addition, bears will start to short, looking for a 200 pip selloff to the July 26 bottom of the current top as their 1st target.
Overnight EURUSD Forex trading
The 2 day breakout was very strong. When there is an unusually strong breakout late in a bull trend, it is more likely an exhaustive move than the start of an even stronger leg up. Since it is strong, there might be one more brief new high before the bulls take profits and the bears sell. The 5 minute chart has been is a tight bear channel since yesterday’s high. This could be an Endless Pullback and the start of a reversal down. However, the odds favor at least one more minor new high 1st. If instead there is a big bear breakout, that would probably be the start of the 200 pip reversal down.
Even though the daily chart is in a strong bull trend, the odds of a sustained trend up from here are small. Hence, bulls will probably be quick to take profits on rallies. Since the 5 minute chart has been sideways for many hours, bulls and bears are scalping. Yet, the odds are that a 200 pips reversal will begin this week. Consequently, bears will begin to look to swing short trades.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After several reversals up and down from expanding triangles, the Emini traded in a tight range for the 2nd half of the day. It is still in its 10 day tight trading range with no sign of a breakout yet.
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.