Emini ignoring China tariffs and trade war ahead of FOMC
Pre-Open market analysis
The Emini has been sideways for 5 days. Traders are deciding if the rally will continue up to the measured move targets above at around 3100 and 3200 or reverse down. The 2 week rally has lacked consecutive big bull bars. It therefore looks like a bull leg in a trading range. But, a strong rally today could change that.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. It will probably gap up today and it might gap to a new all-time high.
A big gap means that the chart will be far above the average price. Since many traders do not want to pay much more than average, big gap up openings usually enter a trading range by the end of the 1st hour. Once there is a pullback to around the moving average, the bulls will look for a reversal up. This usually comes from either a wedge selloff or a double bottom around the 20 bar EMA.
A big gap up also has an increased chance of leading to a bear trend day. When it does, it typically sells off on the open in a series of bear bars. Since the past 2 days were sideways in a bull trend, they have created a potential Final Bull Flag on the 60 minute chart. If there is a selloff, that range is a magnet below.
A big gap up makes a trend day more likely, and a bull trend is more likely than a bear trend. However, even if there is a bull trend for a couple of days, the Emini will probably begin to go sideways next week ahead of Wednesday’s FOMC announcement.
EURUSD Forex breakout above July sell climax high
While the EURUSD daily Forex chart is in an early bull trend, the bulls need a breakout above the June 14 top of the 5 month trading range at 1.1851. Until then, this rally is still in its 5 month range.
The overnight rally is the 1st time in 5 months that the bulls have broken above a significant lower high. While the bulls will eventually
get their breakout above 1.1850, look to the left and you will see that the daily chart had several strong rallies in May and June to around 1.18.
Yet, they were unable to break above 1.1850, which is the major lower high. Therefore, as strong as the overnight breakout was, the daily chart might still go sideways here for a month or more. No matter. It is in an early bull trend and the bulls finally have a higher high after a higher low. That is the definition of an early bull trend.
It is a sign of strength and it will cause more traders to believe the bull case. That will make the bears take quicker profits on shorts and the bulls more eager to buy 3 – 5 day selloffs. This will eventually result in a breakout above 1.1850 and a test of 1.20 and the 50% retracement of the 2018 selloff.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart had a strong 120 pip rally overnight. It broke above 2 significant highs on the daily chart. The rally is strong enough for the bulls to get at least a small 2nd leg up today after the 1st 20 – 30 pip pullback. Therefore, the bulls will buy the 1st pullback.
The bears will need at least a micro double top before they can get a 50 pip pullback. In addition, because today is also a strong breakout on the daily chart, the bears will need at least a micro double top on the daily chart before getting a 100 pip pullback. Day traders will buy pullbacks 30 – 50 pip pullbacks for hold for 30 – 50 pip swing trades.
It is too early for the bears to sell so far this morning. However, the rally of the past hour was climactic. It will therefore attract profit takers. This will create a trading range today. Once in a range, some bears will sell for 10 – 20 pip scalps. But, it will be easier for the bulls to make money and traders should focus on buying pullbacks.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a big gap up to a new all-time high today. It rallied in a weak small pullback bull trend for the 1st half of the day and then entered a trading range. There was a late minor new high.
The bulls want follow-through buying tomorrow, but the Emini often soon goes sideways for a few days after a big gap. In addition, next Wednesday’s FOMC report is another reason for the market to get neutral.
The bears want a gap down and an island top. Alternatively, they want tomorrow to be a bear trend day. It would then be a sell signal bar for Monday. However, the odds are against a reversal until at least after Wednesday’s FOMC announcement.
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.