Emini ioi Breakout Mode going into today’s election
Pre-Open market analysis
After the parabolic wedge bottom last week, the Emini retraced 50% of the 3 week selloff. It is at the 20 day EMA and it has been been going sideways for 4 days. With the uncertainty of the election, it will probably have a lot of trading range price action again today.
Last week’s rally was strong. Furthermore, yesterday was a bull inside day. These factors increase the probability that today will go above yesterday’s high and trigger a buy signal on the daily chart. But, because of the resistance of the 20 day EMA and the uncertainty of the election, any rally might be small.
While yesterday is an ioi Breakout Mode pattern, the close near the high reduces the chance of a big bear day.
No one knows how the market will respond to the election results tomorrow. There is a 50% chance that tomorrow will reverse whatever today does.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex session. It has been in a tight trading range overnight and within yesterday’s late trading range. Also, the daily chart is in a 4 day tight range in the middle of a month-long trading range. With the uncertainty of today’s election, this trading range price action is likely to continue today.
EURUSD daily Forex chart has nested wedge bottom and a double bottom
The EURUSD daily Forex chart is reversing up from a double bottom with the August 15 low. The nested wedge bottom increases the chance of a successful reversal. But, the bear channel down from the October 16 high is tight. A reversal up from a tight bear channel is typically minor. That means that it will probably turn back down within a couple of weeks.
If the bulls then get a 2nd reversal up from above the October low, they would have a major trend reversal setup. Even with that, a rally within the 6 month trading range is more likely than the start of a bull trend.
The buy signal bar of the weekly chart is only a doji. In addition, the 6 week bear channel on the weekly chart is tight. Therefore, a break above last week’s high is not a strong buy setup. As a result, the rally will probably only last a week or two. The bulls usually need a micro double bottom when a buy setup is weak. That would correspond to a double bottom on the daily chart.
Today’s election might be an important financial event. Traders will find out tonight once the polls close. Consequently, if there is going to be a big move, it will probably happen then.
Nested wedge bottom
When a market reverses up from a wedge bottom, there is usually a 2 legged rally that lasts about half as many bars as there are in the wedge. There is a small and a large wedge bottom on the daily chart. The smaller wedge lasted 3 weeks. Yesterday began a 2nd leg up. Another day or two up will satisfy the goal of two legs up from the smaller wedge.
That week-long rally might then be the 1st leg up from the bigger wedge bottom. After a test down for 3 – 5 days, the bulls would try to create another leg up, expecting it to last a couple of weeks.
Consequently, if the wedge bottoms are going to stop the October selloff, there will probably be a trading range for at least 2 more weeks. Then, the bulls will try to form a major trend reversal. The bears will try to create a big bear flag.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has rallied 40 pips overnight. The bulls want to trigger the buy signal on the weekly chart by trading above last week’s high. That is 30 pips above today’s current high.
Traders want to see if the bottom is in on the weekly chart, or if there will be more seller’s than buyers above last week’s high. The bear case is more likely because the weekly and daily buy setups are weak. The bulls will probably need a test of last week’s low before they can begin a swing up.
The momentum up on the 5 minute chart is not especially strong. Therefore, the rally might not get above last week’s high in today’s session. Furthermore, the rally is in the 3rd leg up in an expanding triangle that began in Europe. Consequently, a reversal down today or tonight could easily fall below today’s low.
Since the rally is in a tight bull channel and last week’s high is a little higher, the odds favor sideways to up today. The bulls will buy the first 30 pip reversal down. As a result, the best the bears can get today is a bear leg in a trading range.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The early rally triggered a buy signal on the daily chart. The late rally triggered a buy signal on the weekly chart. But, last week had a tail on top and was the 5th bar in a bear micro channel. That is not a strong buy setup. However, every new bull day increases the chances that the Emini has seen the low of the year.
There might be a 1 – 3 day reaction to the election, but then the market will go back to the technicals. The Emini should test the October 17 major lower high this month, even if there is a 3 – 5 day selloff 1st.
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.