Emini daily and weekly buy setups after October sell climax
Pre-Open market analysis
Yesterday reversed Wednesday’s late selloff, but the rally was weak. The most important concern today is the weekly chart. The bulls want the week to close on its high. That would create a good buy signal bar for next week.
But, the bear trend has been strong on the daily chart. Therefore this rally is probably be minor. That typically means it will be part of a trading range. In a trading range, bulls and bears constantly get disappointed. This reduces the chance of the week closing on its high.
Since the weekly chart is in a 5 bar bear micro channel, the 1st leg up might stall after a couple of weeks. However, the bulls have a credible bottom on both the daily and weekly charts. Furthermore, the parabolic wedge of the daily chart make 2nd leg up likely. Consequently, the bulls will buy the 1st reversal down.
The bears always want the opposite. They want the week to close below its open. The weekly bar would then have a bear body and be a weaker buy signal bar.
Since the open of the week is near last year’s close, the bears will try to get today to close below both.
If the bears get a gap down today, the daily chart would have a 2 day island top. Island tops are minor reversal patterns. Because there is a wedge bottom, there will probably be buyers not too far below today’s low.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It therefore might gap up on today’s open. Since a 10 point gap is small relative to the recent daily ranges, the gap will probably close in the 1st hour.
In addition, the open will probably be near the 20 day EMA, which is resistance. It will also be above the October 24 sell climax high, which is also resistance.
Finally, since the Emini has been going sideways for 2 weeks, it is in a small trading range. Trading ranges disappoint bulls and bears. The bulls were enthusiastic coming into today. A potential source of disappointment would be a tail on the top of the weekly candlestick. That would come if today reversed down from an early rally. Therefore, day traders should watch for any early rally to reverse and for the day to close near its low.
Trading ranges disappoint traders, but trends do not. Consequently, if this reversal up is the start of a trend, today could be a big bull trend day and close at its high and above the 20 day EMA. While possible, this is less likely, especially after yesterday’s repeated reversals. The 5 minute chart appears to be losing momentum. That increases the chance of a reversal down today.
EURUSD Forex bull trend reversal after double bottom and nested wedge bottom
Yesterday’s strong bull trend reversal on the EURUSD daily Forex chart continued early today. The 2 day rally is big enough so that at least 2 legs up are likely over the next 2 weeks. Furthermore, this could be the bottom for the next several months.
Today’s rally has reached resistance at around a 50% retracement of the October selloff and the 20 day EMA. The October 24 sell climax high is another magnet. The bulls will take partial profits here and bears will start to look to sell for a day or two pullback from the reversal up.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 150 pips in a tight bull channel since yesterday’s low. Because that is unsustainable, it is a buy climax. The bulls will soon become exhausted and take partial profits. Instead of buying for any reason, they will become selective. They will wait to buy 20 – 50 pip pullbacks to support. As a result, the strong 2 day rally will evolve into a trading range today.
The bears know this and they will begin to sell reversals down for 10 – 30 pip scalps.
The 2 day rally was strong enough to make both bulls and bears expect a 2nd leg up. Consequently, there will be buyers below, like around Wednesday’s high and a 50% pullback.
Wednesday theoretically was a buy signal bar on the daily chart. Since it had a bear body, it was a bad buy signal. Bears would sell above its high and scale in higher. Since that is reasonable, the odds are they will avoid a loss in their 1st entry at Wednesday’s high.
This means that there should be a pullback within a few days that dips below Wednesday’s high. The bears will buy back their shorts there and the bulls will buy again. This should create a higher low and lead to another leg up.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed down from above yesterday’s high and traded below yesterday’s low. It was therefore an outside down day at the 20 day EMA. A 2nd leg up is likely after the parabolic wedge bottom on the daily chart. Therefore, any selloff next week will probably reverse back up after 2 – 3 days.
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.