Emini adage says Thanksgiving belongs to the bears
Pre-Open market analysis
There is an old-timer’s stock market and therefore Emini adage that says Thanksgiving belongs to the bears and Christmas belongs to the bulls. I bring it up because it is part of stock market tradition. However, it is a calendar trade, and calendar trades are useless. Never place a trade based on seasonal tendencies because you will lose money over time.
The Emini had a big gap down yesterday, but it was a trading range day. The bulls want a gap up today or soon to create an island bottom. But, an island bottom is a minor reversal pattern and therefore not particularly helpful.
The bears still have their October/November double top. The October 29 low of 2603.00 is the neck line. A measured move down would to below 2400. It is still more likely that there will be buyers around the current level or down around the February low.
When there is a big gap, like yesterday, the Emini often goes sideways for a few days. It then decides whether there will be follow-through or a reversal. With tomorrow being a holiday and many traders not trading on Friday, there is an increased chance of quiet and therefore sideways trading.
Overnight Emini Globex trading
The Emini is up 19 points in the Globex session. Yesterday’s selloff was in a bear channel, and 75% off bear channels have bull breakouts. Today will gap above the channel.
Since channels typically evolve into trading ranges, that is what is likely today. This is especially true because of tomorrow is a holiday and markets are usually quiet the day before. However, yesterday ended with a lower low major trend reversal. Consequently, there is a 40% chance of a strong bull trend day today.
EURUSD High 1 bull flag after buy climax rally following wedge bottom
The EURUSD daily chart had a big outside down day yesterday. After a 5 day rally, the bears will probably need a micro double top if they will be able to continue the bear channel.
If today remains a bull inside day and tomorrow trades above today’s high, but then reverses down from Monday’s high, the bears will have a micro double top. They hope that it would lead to a break below the November 12 wedge bottom and continue the 2 month selloff. Their goal is a 600 pip measured move down from the 6 month trading range. They have a 40% chance of success.
Since the 5 day rally was strong, the bulls will buy the 1st selloff, even if it is deep. For example, it might retest the October 31 low. There would then probably be a rally back up to at least this week’s high. Because the weekly chart has a wedge bull flag and the daily chart has a wedge bottom, the daily chart will probably trade sideways to up for at least a couple more weeks. In addition, the rally will probably test lower highs, like the November 7 high.
The daily chart will probably test the October 16 major lower high within a couple of months. This is because that was the start of the channel that followed the late September spike down. Typically, a Spike and Channel bear trend breaks above the bear channel, rallies to the beginning of the channel, and evolves into a trading range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 60 pips overnight from above yesterday’s low. Since the bulls have done enough to create a good buy signal bar, there is no incentive to rally much more today. Therefore today will probably enter a trading range for the rest of the day.
The bears want a reversal down from the overnight wedge rally. But, the best they probably can achieve is a transition into a 40 pip trading range. Day traders have been scalping overnight and they probably will continue today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped above yesterday’s bear channel. It then had a weak rally to above yesterday’s high. It spent most of the day in a tight range, then reversed down late. On the daily chart, today is a Low 1 bear flag sell signal bar for tomorrow.
Yesterday gapped down. A gap up at any point over the next several days will create an island bottom.
The market is closed tomorrow and I will be away on Friday. The bears want the week to close below last week’s low as a sign of strength. The bulls always want the opposite.
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.