Emini giving back all of 2018 gains on test of 2700
Pre-Open market analysis
Since yesterday was another big bear day on the daily chart, the Emini will probably test the next major support at 2700 within a few weeks. Look at the 1st half of the year. What was the most important price? It was last year’s close at 2689.75. I say that because the Emini repeated oscillated around it for 6 months. After 2 strong down days, lower prices are likely. But, because the selling was climactic, the odds favor a bounce for a week or two.
Note, last year’s close is within reach. Since it was so important for half of the year and the Emini is almost there again, it will probably get there again within a few weeks. Traders will sell rallies until then. Because it was such a strong magnet, it will probably stop the selling for at least a few days. The bulls will need a micro double bottom there if this selloff is just a higher low in a bull trend.
Overnight Emini Globex trading
The Emini is up 34 points in the Globex session. While that is a huge number, it is modest compared to the range of the past two days. After 2 climactic bear days, the Emini will probably trade sideways to up for several days especially after yesterday’s late strong reversal up.
The daily ranges will begin to shrink, but the swings up and down will still be much bigger than normal. Along with smaller ranges, the Emini will become more two sided. The exhausted bears will probably begin to take profits, and value oriented bulls as well as traders will begin to buy. The result will probably be a retracement of this week’s selloff.
Today is Friday so weekly support and resistance can be important, especially late in the day. Targets include the August 2 low of 2800, which is also a Big Round Number. While the bears want the week to close on its low, that is unlikely because 2 climactic days will make bulls and bears buy (bears buy back surprisingly profitable shorts). The result will probably be a sideways to up day. Because the selling has been extreme, there is an increased chance of a bull trend day today.
EURUSD Forex minor bull leg in early bull trend
The EURUSD daily Forex chart retraced half of he October 9 selloff. While the bears want this rally to be a bear flag, it is more likely the first of at least 2 legs up in the 6 month trading range.
A trading range is a neutral environment, which means that the direction of the eventual breakout is as likely to be up as it is to be down. There are factors that change the odds. Here, the monthly chart is in a bull trend. Additionally, the bulls got a dramatically strong reversal up from a breakout below the range. Both of these features make it more likely that the eventual breakout will be up.
However, trading ranges have many strong legs up and down that look like they will successfully break out. But, 80% of trading range breakouts fail. Therefore, a trader will make more money betting on reversals than on trends until after there is a clear breakout.
The daily chart is in the middle of the range. When that is the case, the legs often are brief. At the moment, the bulls will probably need some kind of double bottom with this week’s low before they will be able to test the top of the range at 1.18.
Traders understand the implication of the August bull trend reversal. They therefore will buy strong selloffs to just below the middle of the trading range instead of waiting to buy at the bottom. This will probably result in buyers around this week’s low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart drifted down 40 pips in a weak bear channel overnight. Most of the bars were small, had prominent tails, and overlapped several prior bars. This is trading range trading. Day traders have been scalping for 10 pips. There is no sign that this is about to change today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off in a broad bear channel today, but held above yesterday’s low. It reversed up to close near the high. Today will then be a buy signal bar for Monday. Because it is a doji bar after 2 big bear bars, it is a weak setup. It will probably led to a 1 – 3 day minor reversal up. The odds favor a test below last year’s 2689.75 close within a couple of 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.