Emini buy climax is ignoring Trump’s failed healthcare repeal
While today began with consecutive bull bars, they were not strong. In addition, this is similar to the open on the past 5 days. Consequently, today will probably behave like those days. Although the Emini began Always In Long, it will probably soon go sideways for an hour or two. Furthermore, this lack of energy increases the chances of a lot of trading range trading today.
Since this rally is a bull break above yesterday’s bull channel, traders will watch for an early reversal. This is because most of these breakouts fail. Only 25% lead to strong bull trend days.
Because it gapped to a new all-time high, it might reverse. If so, it could form a higher high major trend reversal on the 60 minute chart. Since the 60 minute trend is in a tight bull channel, the reversal would more likely be minor. Therefore, the odds are against a big bear day.
Pre-Open market analysis
The Emini pulled back for 2 days after a strong bull breakout. Furthermore, yesterday reversed up from the 60 minute moving average. While the odds still favor higher prices, the Emini might go sideways for a few more days. Less likely, the pullback to the weekly moving average is underway.
Overnight Emini Globex trading
The Emini is up 2 points in the Globex market. After 8 consecutive bull days on the daily chart, the odds are that today will close below its open and create a bear day. Furthermore, yesterday was a Spike and Channel bull trend. Since bull channels usually have bear breaks and evolve into trading ranges, that is likely today. There was no top yesterday. Therefore, yesterday’s rally could continue for a couple of hours on the open. Yet, the odds are that today will have at least a couple hours of sideways to down trading. In addition, it will probably begin by the end of the 2nd hour.
However, the 60 minute chart went sideways for 9 hours at that high on Monday. In addition, yesterday’s rally put the market back into that tight trading range. Since the market went sideways there last week, it will probably go sideways there again today.
The bulls want the rally to continue to a new all-time high. While yesterday is a buy signal bar on the daily chart, it was big. When a buy signal bar is big, the stop is far below. This makes traders hesitant to buy above the signal bar high. therefore increases the chances that there will be many sellers above yesterday’s high. Consequently, this is another force in favor a trading range trading today.
EURUSD Forex market trading strategies
Yesterday’s big bull trend bar on the daily EURUSD Forex chart changed the probabilities. Because it close far above the 3 week trading range, it might lead to a measured move up. In general, when there is a breakout above a reversal pattern, there is a 50% chance that the breakout will succeed. There is also a 50% chance that it will fail, and the market will still reverse.
Since yesterday’s breakout was big, the probability for the bulls is slightly more than for the bears. However, if the EURUSD pulls back below the breakout point in the next few days, the probability will again be about 50% for the bulls and the bears over the next couple of weeks.
Minor or major reversal?
Even if the bears close the gap and get a reversal, it will probably be minor. This means that they would probably get a test down to the bottom of the 3 week week rather than a bear trend. When a bull channel is as tight as this 4 month channel has been, bulls usually buy the 1st reversal.
This means that the reversal is typically minor and the best the bears get is a trading range. Yet, if the bears get their pullback into a trading range, they then will try to create a major reversal. Since this process would require 20 or more bars, the downside over the next few weeks is probably less than 200 pips.
Overnight EURUSD Forex trading
The 60 minute chart has pulled back about 70 pips from yesterday’s high. Yet, the bears have failed to close the gap above the July 12 high. They need a selloff that drops at least 20 pips below that high to make traders think that the 3 week rally might still be a wedge top. The 5 minute chart has been in a 25 pip range for 6 hours. Therefore, traders are scalping as they wait to see if the gap will close or remain open.
Since the selloff overnight was in a tight bear channel, it created a Big Up, Big Down pattern with yesterday’s rally. This confusion usually leads to a trading range. That is what is likely today.
However, the 4 month bull channel is tight. Therefore, swing traders are still buying pullbacks, betting on higher prices. Since any reversal down will probably be minor, swing trading bears are selling above prior highs and only holding for 50 – 100 pips profit.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today gapped up to a new all-time high. In addition, it was a trend from the open bull trend. Furthermore, it was a small pullback bull trend.
When there is a strong trend, there is a 50% chance of follow-through buying tomorrow in the 1st 2 hours. In addition, there is a 75% chance of at least 2 hours of trading range trading starting by the end of the 2nd hour.
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.