Emini buy climax needs sell signal and trend reversal
The bear ioi sell signal on the open is a 2nd failed breakout above yesterday’s high. This is therefore a reasonable swing short for the high of the day. Yet, the small bars make an early trading range likely, whether or not this remains the high of the day. Furthermore, it increases the chances of a lot of trading range trading again today.
The target for the bulls is the top of Thursday’s sell climax. They first need a strong breakout above the open to retake control.
Pre-Open market analysis
The Emini had a big bear day on Thursday, but it closed far above its low. Friday was also a trading range day. However, it was a bull inside bar on the daily chart and it closed on its high. It is therefore a buy signal bar for today. If today trades above Friday’s high, the odds favor at least slightly higher prices for today and tomorrow. Yet, the Emini is in an 8 bar tight trading range. Hence, the odds are that today will have a lot of trading range price action, even if it has a bullish bias.
Overnight Emini Globex trading
The Emini is up 4 points on the daily chart. Since Friday was a bull ioi day, it is a buy signal bar today. The overnight rally increases the chances of the buy signal triggering today. Furthermore, there is enough room to Thursday’s high for a rally up to that level today. Consequently, there is an increased chance of a bull trend today. However, because most days over the past several months have had a lot of trading range price action, today probably will as well, even if it is a bull trend day.
Thursday’s bull reversal, Friday’s bull reversal, and the overnight bull momentum make a bear trend day less likely today.
EURUSD Forex market trading strategies
The daily EURUSD Forex chart is in a strong bull trend. However, big bull bars are now followed by small bars or bear bars. This is the earliest indication of a transition into a trading range.
Because the stop for the bulls is far below on the daily chart, bulls will probably begin to reduce their position size to reduce their risk. Consequently, the odds favor a pullback soon. Because of the buy climax, the pullback will probably last longer and be deeper than what traders expect. Hence, a trading range is likely over the next month.
The EURUSD Forex market is losing momentum on the daily chart. While it is in a tight bull channel, there have been many buy climaxes in the channel. This is therefore a parabolic wedge bull channel, which is a climax pattern. While there is no top yet, this typically is the final stage of a bull trend before it transitions into a trading range. A trading range is a pullback that lasts 20 or more bars. This means that the bulls lose control and the market becomes neutral. That is what will probably happen over the next couple of months.
Since buy climaxes can extend much further than what appears reasonable, this one could continue until it is above the 1.2000 bottom of the 7 year trading range that ended in 2014.
Overnight EURUSD Forex trading
The 5 minute chart has been in a 20 pip trading range for 6 hours. While Friday is a bull inside bar on the daily chart and therefore a buy signal bar, the 5 minute chart is at the top of an 8 day tight trading range and after a buy climax. That makes a big bull breakout unlikely. Since there is a measured move target just above last week’s high and the momentum up was strong on Friday, the rally might continue for a few more days. Furthermore, the overnight pullback looks more like a bull flag on the 240 minute chart than a reversal down.
The bears see Friday’s rally as a test of Thursday’s high and therefore a potential double top. The bears need a strong break below Friday’s 1.1649 low to trigger the double top.
Since the 5 minute chart is in a small range within an 8 day range, the odds favor more trading range trading today. Hence, day traders will scalp. Because it is at the top of the range, there is an increased chance of either a bull breakout or a bear reversal. If there is a strong move up or down, day traders will switch to swing trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was the last day of the month, and the 4th consecutive strong bull trend bar on the monthly chart. Despite the buy climaxes on all higher time frames, there is no top yet. While the rally can continue, the odds are that it will not get much higher. Instead, a trading range over the next several weeks is likely. In addition, the odds favor 100 – 150 points sideways to down below the weekly moving average once the reversal begins. In the meantime, most days will probably be trading range days with swings up and down.
There is a nested head and shoulders top over the past 2 weeks.
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.