Emini breakout above wedge top after government shutdown
Today began with a continuation of yesterday’s rally. It is a Buy The Close open. However, there is a 75% chance that the Emini will enter a trading range by the end of the 2nd hour. In addition, that sideways to down trading will last at least 2 hours.
Furthermore, while the bulls have several consecutive bull bars, the bull bars are not big. Finally, the rally is in a tight bull channel and has had at least 3 legs. This makes it a parabolic wedge rally. This usually leads to at least 10 bars sideways to down, which could be the start of the 2 hour trading range.
Pre-Open market analysis
Yesterday broke strongly above a wedge top on the 60 minute chart. The measured move up is around 2860. It was a Trend From The Open bull trend, and and finished the day with 3 pushes up on the 5 minute chart. This is therefore a wedge rally on the 5 minute chart. However, the final leg up was strong. Hence, the bears will probably need at least a micro double top before they can create a swing down.
Last week had a big tail on the bottom of the bar on the weekly chart. That is a pause after a 2 week buy climax. The pause might continue this week. If so, this week will also close near its open. Since it is currently a bull trend bar, there is an increased chance of a reversal down in the 2nd half of the week.
If instead this week closes on its high, it will be a consecutive buy climax with the 2 week rally from the week before last. That would increase the chance of a 2 bar reversal on the weekly chart. This means there would be an increased chance of a reversal down next week.
Despite the buy climaxes on all higher time frames, the bull trends are exceptionally strong. Consequently, there is a 70% chance that the bulls will buy the 1st reversal down. This is true even if it is climactic and big. Therefore, the odds are that any reversal down over the next few months will be a bull flag. This means that it would lead to a test back up to the all-time high.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex market. The rally into yesterday’s close increases the chance of at least a small 2nd leg up before there is a swing down. Yet, it was climactic. Therefore, there is a 50% chance of at least 2 hours of sideways to down trading beginning by the end of the 2nd hour.
As strong as yesterday was, it was extreme. This means that there is only a 25% chance of another very strong bull trend day today.
EURUSD Forex chart in bull flag at resistance
The EURUSD daily Forex chart has been in a tight trading range for 7 days. There is a 60% chance of a bull breakout and a 40% chance of a bear breakout. As more days get added, the probabilities will approach 50%.
Since the chart is testing the bottom of a 10 year trading range on the monthly chart, it is at resistance. It is also near the top of a wedge rally on the monthly chart. Consequently, the bears are hoping for a reversal down that could last several months. Yet, in the absence of consecutive big bear bars on the daily chart, the odds continue to favor higher prices.
Overnight EURUSD Forex trading
The 5 minute chart has been in a tight trading range for 5 days. In addition, it has been in a 60 pip range for 2 days. As a result, day traders are scalping, waiting for a strong breakout up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The 3 early big bear bars made a bull trend unlikely. Yesterday’s strong rally made a bear trend unlikely. Today was a trading range day.
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.