Emini ioi breakout mode after October parabolic wedge sell climax
Pre-Open market analysis
The Emini formed an inside day yesterday. There is therefore an ioi Breakout Mode setup on the daily chart. But, the extreme parabolic wedge bottom on the daily chart makes a relief rally more likely than a continuation of the selling. While some bears will sell below yesterday’s low, there will probably be more buyers below. Bulls will probably also buy above yesterday’s high, especially since yesterday closed near its high.
I wrote over the weekend that the parabolic wedge sell climax would likely lead to a 1 – 2 week rally. However, I said that there might be one brief new low 1st. Monday so far was a brief new low. The bulls need to begin a swing up this week.
Even though the Emini will probably rally over the next 2 weeks, the bears have been strong. Consequently, the rally will probably be weak. That means that the rally will probably not have several consecutive big bull days. Instead, there will probably be pullbacks after every day or two up. As a result, the rally will probably be in a tight bull channel instead of a bull breakout.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It will therefore probably gap above yesterday’s high and above the close of last year.
A gap up increases the chance of a trend day. Since the gap is up, if there is a trend day, up is more likely. That is especially true since the daily chart has a parabolic wedge sell climax.
Bull trends usually have at least a minor selloff on the open. But, there is usually a reversal up from a double bottom or a small wedge bottom at support. That support is yesterday’s high, last year’s close, and the 20 bar EMA.
The bears who create that early selloff know that the bulls will try to get a reversal up. They will therefore try to overwhelm the bulls and push the selloff far below support. If the bears break below support, they still have the problem of a sell climax bottom. Therefore, the selloff will more likely lead to a trading range or a weak bear trend.
Day traders will watch what happens at support. If there is a reversal up, the bulls could have a strong bull trend day.
EURUSD Forex nested wedge bear channels at bottom of 6 month trading range
The EURUSD daily Forex chart is continuing down in its 6 week bear channel. Today’s low is now only 30 pips above the August 15 bottom of the 6 month range. There is now a 50% chance of a break below that low.
However, trading ranges resist breaking into trends. Therefore, if the bears get their breakout, there is a 60% chance of it reversing back up within a week.
If the breakout is made of consecutive big bear bars, the probability will flip in favor of the bears. They would then have a 60% chance of a measured move down. That would be either from the October 16 major lower high or the September 24 top of the 6 month range.
Traders are deciding if the selloff will reverse up from above or below the August 15 low. The bottom of the 6 month range is major support. But there is no breakout nor a reversal up yet. Traders should find out within a week. What takes place here will determine the direction of the next several hundred pips.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight. This is a lack of conviction. Traders are waiting for a breakout up or down on the 5 minute chart. Since the chart is at major support on the daily chart, a breakout up or down on the 5 minute chart could be unusually big. This is because it could be the start of a 300 pip move on the daily chart.
Until there is a breakout, there is no breakout. Day traders have been scalping overnight. However, everyone is aware of what is going on. Traders will quickly switch to swing trading once the breakout comes. This is especially true if the breakout is big.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was the last day of October and the Emini found buyers at the 20 month EMA. There was a 20 Gap Bar buy signal. However, because October was a big bear trend bar, the Emini will probably go mostly sideways for a few months.
It reversed up from a parabolic wedge selloff on the daily chart. There is room to the targets above, which are the 20 day EMA and the September 19 major lower high at around 2820. Since the Emini will probably work higher over the next week, there is an increased chance of bull trend days. Today’s late selloff turned the day into a doji day on the daily chart.
The bears want a gap down tomorrow. That would create an island top with today’s gap up. Alternatively, they want tomorrow to trade below today’s low. That would trigger a sell signal on the daily chart. However, the odds still favor sideways to up trading for at least another week.
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.