Emini awaiting catalyst to begin 5% September correction
Today began with a failed breakout above yesterday’s high. Yet, the sell signal bar was a bull trend bar. Because this is a weak sell signal and limit orders bulls made money buying the close of the 1st bar, the odds favor an early trading range. In addition, yesterday’s 4 hour trading range is a magnet. Finally, the 60 minute moving average is support.
The bulls are trying to get an opening reversal up from the 60 minute moving average and yesterday’s close. Since there were 2 strong bear bars, the Emini is Always In Short. Consequently, bears will probably sell the 1st rally. Therefore, the odds favor another trading range open for the 1st 1 – 2 hours. In addition, this reduces the odds of a strong trend day up or down.
Since yesterday’s range was small, there is an increased chance that today will break below yesterday’s low. That would create an outside down day. Yet, since the daily chart has been in a trading range for 2 weeks, that would not be particularly bearish.
Pre-Open market analysis
The Emini is in a strong bull trend on all higher time frames. Yet, the rally is so extreme that it is climactic. Therefore there is an increased risk of a 100 point pullback lasting 2 – 3 months.
The daily chart is in a bull channel. Hence, there is a 75% chance of a bear break below the trend line. But, there is no top yet. The Emini has been in a tight range for 10 days. Consequently, it will likely continue sideways today. The next catalyst is Friday’s unemployment report.
Overnight Emini Globex trading
The Emini is up 2 points in the Globex market. It is at the top of a 2 week trading range. The odds are that today will continue yesterday’s trading range trading on the open. Furthermore, today will probably be mostly a trading range day. However, day traders need to be ready for a series of strong bear trend days beginning within the next month or two. Once they begin, they will tend to have strong selloffs in the final hour.
EURUSD Forex market trading strategies
The monthly EURUSD Forex chart has had 4 consecutive big bull trend bars. This reversal up from a lower low major trend reversal is very strong. Therefore, the bears will probably need at least a micro double top before they can create a reversal down. Since that would take at least 2 more bars, the downside risk over the next 2 months is small. Yet, because the rally is at the major resistance of the bottom of a 10 year trading range, it might stall for a month or two. Additionally, the 1.2000 Big Round Number resistance is just above.
The daily chart is in a parabolic wedge buy climax. This usually has a bear breakout. The channel then evolves into a trading range. Therefore, that is likely here. Yet, there is no top or reversal down yet. Because the rally is extreme and a buy vacuum up to resistance, it will probably end soon. The pullback will probably last 20 or more days and have at least a couple of legs down. The result will be a trading range. The first target is prior minor higher lows, like the July 26 low. That is about 200 pips below.
Overnight EURUSD Forex trading
Friday’s rally on the 5 minute chart was strong. It was therefore likely to lead to at least one more leg up. Last might’s rally met that minimum goal. Hence, the bears have the minimum that they need to begin a 200 pip pullback. The reversal down over the past 4 hours was only 50 pips. The bears need a much stronger selloff before traders believe that the pullback has begun. Yet, it was big enough to create confusion. Therefore, traders will probably switch to trading range scalping today.
While it is possible for the bulls to continue to create strong breakouts, the buy climax on the daily charts means that they will take profits at new highs. They will begin to buy pullbacks instead of breakouts. In addition, the bears will begin to sell above prior highs. The result is that the strong bull channel on the daily chart will convert into a trading range soon.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini has been in a tight range for 2 weeks. Most days have had early selloffs followed by reversals up. Today was an example. While the strong bull trends on the higher time frame charts favor higher prices, the extreme buy climax on the weekly chart make a 100 – 150 point correction likely before this rally continues much longer. However, there is no top or strong reversal down 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.