Emini brief July rally from head and shoulders bottom
Pre-Open market analysis
The Emini broke above the neck line of a head and shoulders bottom on the 60 minute chart. Since the breakout went far above, the odds are that there will be at least a small 2nd leg up today or tomorrow. Therefore, traders will look to buy the 1st pullback to around the 2750 neck line this week.
Because Friday’s rally was extreme, the bulls are exhausted. Today therefore might have more trading range trading. However, the odds favor at least some follow-through buying today or tomorrow.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. But, it has been in a tight trading range for 10 hours. That might therefore continue on the open.
Today will probably open with a big gap up. The Emini will therefore be far above the average price. Consequently, many bulls will wait for it to get closer to the EMA before buying. This increases the odds of an hour or so of sideways trading on the open.
A big gap up has an increased chance of leading to a trend day. If there is a trend, a bull trend is slightly more likely.
As strong as Friday was, the Emini is getting close to the top of its 6 month range. Therefore, day traders will look for either a wedge top or a major trend reversal for a swing trade down. With Friday’s 4 hour tight trading range and the overnight 10 hour tight trading range, today will probably spend a lot of time going sideways.
EURUSD Forex strong bear rally
The EURUSD is getting drawn up to the June 14 sell climax high. It will probably break a little above that resistance before traders will sell. The bulls will take profits and the bears will short. Both will correctly bet that this strong rally is a bull leg in a trading range.
If there is a strong breakout above, the next targets are the May 14 lower high and 50% retracement, which is slightly higher. Less likely, the rally will reach the March 1 low. That low is the breakout point below a 4 month trading range.
Since the 2 month selloff was extremely strong, there is only a 40% chance that the current rally will continue up to the February high. Even with the double bottom, the rally will find sellers above. At a minimum, if the rally reaches the May 14 high or March 1 low, there will then be at least a 50% pullback over the next couple of months. Therefore, even at their best, the bulls will still only get a bull leg in a trading range. Traders are now simply looking for the top of that range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 40 pips in the European session. While the odds are that the rally will continue up another 60 pips to the June 14 high, there will probably be a pullback today or tomorrow. Remember, the daily chart is now near the top of a 2 month trading range. The bears will begin to short and the bulls will start to take profits.
Since there is a 70% chance of a test of the June 14 high within a couple of weeks, the bulls will buy 50 – 100 pip pullbacks. In addition, the bears will look for the rally to stall. They then will sell for 30 – 50 pip reversals down.
Day trading bears will scalp for 10 pips on reversals down from new highs in the 5 day bull channel. The bulls will look to buy 20 – 30 pip pullbacks for a test back up to the top of the channel.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a weak bull trend day. However, it was good follow-through buying after Friday’s big rally. In addition, the magnets of the March lower high and the 2800 Big Round Number are just above. The momentum up is strong enough so that the Emini will likely get closer to the magnets this week.
If the Emini breaks strongly above the March high, it will probably continue up to a new high within a month or so. The bears need a strong reversal down this week, but the odds favor the bulls.
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.