Emini bull leg in trading range after tradable bottom
Today opened with a big gap down to the 60 minute EMA and the open of the week. It reversed up strongly and then down strongly. Traders do not want to use stop entries when the bars are huge. This is therefore a trading range open. Traders expect breakouts to reverse. If today falls below yesterday’s low, there will probably be buyers below.
At the moment, the Emini is Always In Long from an Opening Reversal up from support. However, the bulls do not yet have consecutive big bull bars closing on their highs. Therefore, the direction of the 1st swing is not yet clear.
Today is a 2nd consecutive inside day so far. There will probably be sellers above yesterday’s high and buyers below its low. These big early reversals and huge bars in a sideways market make a trading range day likely.
Pre-Open market analysis
The Emini 5 minute chart yesterday was a bull trending trading range day. The odds are that it will continue to work higher for another week. However, there might be pullbacks along the way. This means that there will be buyers below yesterday’s low.
Overnight Emini Globex trading
The Emini sold off 50 points in the past 10 minutes and is down 30 points on the session. I have said that the rally up to last week’s lower high would have pullbacks. The Emini is now around yesterday’s low.
The bears want the bear trend on the daily chart to resume. More likely, the Emini is in a trading range and Friday will be the start of a bull leg in the range. Consequently, a selloff below yesterday’s low will probably only last a day or two. Traders will therefore look for setups for a swing up to above last Wednesday’s high of 2726.75.
There will probably be more buyers than sellers below yesterday’s low. Therefore, the pullback will probably only last a day or two before the bull leg in the trading range on the daily chart resumes.
Because the daily chart is probably in a 1 – 3 month trading range, the 5 minute chart will have more trading range price action. As a result, the breakouts up and down will have less follow-through. They bulls and bears will take quicker profits. Traders should expect swings up and down every day.
EURUSD in sell zone for 2nd leg down
The EURUSD daily Forex chart has retraced about 50% of its 2 week selloff. It is therefore in the sell zone for a 2nd leg down after a wedge top at resistance. If instead the rally breaks above the January high, there is only a 40% chance that the breakout will be the start of a new leg up. There is a 60% chance that it would reverse down for 2 legs.
Traders will begin to look to sell for a swing down to below the January 18 low at around 1.2200. If there is a 2nd leg down and it forms a double bottom with last week’s low, they will look to buy. This is because the 2 legs down is the minimum expectation. Once met, the bulls will be willing to buy again, hoping for a successful breakout above the January high. Yet, the chart more likely will continue in its trading for at least another month. As a result, the odds are against a big move up or down until then.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart just sold off 70 pips in the past 5 minutes. If the day closes in this area, it will be a sell signal bar on the daily chart for a lower high. Traders expect the 4 day rally to fail because the wedge top on the daily chart should have at least a small 2nd leg down. However, yesterday was a bull day on the daily chart. It is therefore a low probability sell signal bar.
The selloff of the past 5 minutes traded below yesterday’s low. Since yesterday is a low probability sell signal bar, there will probably be buyers here. This is despite how strong the selloff has been. While this might be the start of the 2nd leg down, it might pause here because the sell signal bar was bad. If so, it might drift up and form a micro double top with today’s high within a few days. That would be a higher probability sell for a swing down to below 1.2200.
Today is an outside down day. Outside days usually do not go far below yesterday’s low. While the selloff has been very strong, the odds are that it will not go much lower. The bulls will return by the end of the day for at least 1 – 2 more days up to a micro double top with today’s high.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was another good day for the bulls. The odds are that this rally will continue to above last week’s lower high and to around 2780. This is because January was a reasonable buy month, and 2780 is the midpoint. It is therefore the middle of the reasonable buy.. However, the rally is still likely a bull leg in a 1 – 3 month trading range. Therefore, the bears will look to sell around 2750 – 2780 for a trade down.
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.