Emini breakout above the March high and 2800 might fail
Pre-Open market analysis
The Emini gapped up yesterday, but then sold off and closed the gap. Because yesterday closed below the open, the bar on the daily chart had a bear body. It is a sell signal bar for today for a failed breakout above the March high.
Since it had a prominent tail below and the past several weeks have been in a tight bull channel, it is not a strong sell setup. A minor reversal is more likely than a bear trend. However, the location is good for the bears. Therefore, there is an increased chance of a big bear trend day today.
The bulls hope that yesterday’s selloff was just a pullback from the gap up. But, the selling on the 5 minute chart was strong enough to make a big bull trend day unlikely today.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex market. Since the past 10 days have been small, the breakout attempt above the March high so far is weak. That increases the chances of a test down for 2 – 3 weeks. If the daily chart pulls back, there will be more swings down on the 5 minute chart.
While the Emini has rallied for 2 weeks, the 60 minute chart is in a channel with very few consecutive big bull bars. This makes the rally more likely a bull leg in a trading range than in a bull trend. It therefore increases the chance of a bear leg that would test the bottom of the channel at around 2770.
Therefore, there is an increased chance of swings down on the 5 minute chart for the next week or two. Less likely, the chart will break strongly above the 2 week channel on the 60 minute chart without the pullback.
EURUSD Forex apex of triangle after May sell climax down to support
Nothing changed overnight on the EURUSD daily Forex chart. It is still at the apex of a month-long triangle that is part of a 2 month trading range. In general a triangle has an equal chance of breaking out up or down. In addition, there is a 50% chance that the 1st breakout fails within a few bars.
This triangle is at support on the weekly chart. Furthermore, it is following a series of sell climaxes down to that support. These factors make a successful bull breakout slightly more likely. But, that breakout will probably form a lower high around 1.20 that would then lead to a move down to around 1.20 within the next 6 months.
Since the legs in the triangle are now lasting only a few days, traders on the daily charts are taking quick profits. They want to see a strong breakout up or down before they will hold onto positions.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip trading range since yesterday’s close. That makes it difficult for day traders to make money even when they are scalping. Most day traders should wait for today’s range to expand. A big trend day is unlikely. Therefore, day traders will trade reversals for 10 pip scalps.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied in a broad bull channel and continued its breakout above the March high. There was an extremely strong breakout in the final 30 minutes. If institutions are buying late like this, they believe they might not be able to buy at this price tomorrow. This increases the chance that the bull trend is resuming on the daily chart.
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.