Emini is ignoring Trump China, North Korea, and Russia sanctions
Yesterday ended with a small wedge. Therefore the odds favor 2 legs sideways to down. Since the wedge was only 4 points tall, the odds are that the open will be mostly sideways. The bottom of the wedge is around the 60 minute moving average, which is support.
Although yesterday was a bull channel, which acts like a bear flag, support is just below the open. Therefore, the Emini can break below yesterday’s bull trend line by simply going sideways instead of down.
Today began with several small bars within yesterday’s closing range. This increases the odds of a trading range open. Furthermore, it increases the chances for another trading range day. Finally, most days over the past month have had reversals. Consequently, the initial trend, even if it is strong, will probably reverse after 2 hours or so.
While any day can be a trend day, this open makes another trading range day likely.
Pre-Open market analysis
The Emini had an outside down day yesterday, but it stayed within its 2 week trading range. Since the higher time frames are in bull trends, the odds favor at least slightly higher prices. In addition, the 2,500 Big Round Number is a magnet just above. Yet, the extreme buy climax on the weekly chart makes a strong rally from here unlikely. The odds favor a 100 – 150 point bear leg down to the bottom of the 5 month bull channel at some point this year. However, there is no top or bear reversal yet.
Since most days have been trading range days, the odds are that today will be one as well.
Overnight Emini Globex trading
The Emini is unchanged in the Globex session. Most days have been had early selloffs that reversed up. In addition, most have had a lot of trading range price action. Since tomorrow’s unemployment report is a catalyst, that further increases the chances for trading range price action.
EURUSD Forex market trading strategies
The EURUSD is getting vacuumed up to the 1.2000 Big Round Number in a buy climax. Since it was support for about 10 years, it is now resistance. Until there is a strong reversal down, the odds favor higher prices. However, since the rally is accelerating in a parabolic wedge, the odds are that it will end within a few weeks.
Most buy climaxes and bull channels evolve into big trading ranges. Therefore, that is likely here over the next month or two on the daily chart. Support below is at the prior higher lows. When channels reverse, they usually test down to the start of the channel. That is the July 26 low, and it is currently 300 pips below the high.
Climax often evolves into tight trading range
Buy climaxes often evolve into tight trading ranges. If the daily chart goes sideways in a tight range for a few weeks, it will enter breakout mode. The bears will look for a double top lower high major trend reversal. They expect a 300 pip reversal down to the July 26 bottom of the bull channel.
The bulls will always look for a double bottom bull flag. Since the rally is in a climax, if the bulls get a breakout above the bull flag, it will probably soon fail. The flag would then become the final bull flag before a correction lasting a month or two.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has rallied 40 pips over the past hour. It therefore retraced about 50% of the selloff from yesterday’s high. Since the rally is not strong, it is likely a leg up in a developing small trading range. This increases the odds of trading range trading today. The next catalyst is tomorrow’s unemployment report. Because of the reversal yesterday and the report tomorrow, the odds favor a small, scalping day today. However, because of the buy climax, the EURUSD Forex market can reverse down strongly at any time.
Since there is the 1.2000 magnet above, it can also have a big rally above the target before reversing. Consequently, there is an increased chance of a big move up or down within the next few weeks.
While there was a reversal down yesterday, it was small. The bears need a much bigger reversal before traders believe that the rally has ended. Sometimes the buy climax converts into a tight trading range before reversing. It is too early to know if that will happen here. In the meantime, the odds still favor slightly higher prices.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was a small trading range day. Like most days over the past month, it sold off on the open, but reversed up in the middle of the day. The higher time frames are in strong bull trends. Therefore, the odds favor slightly higher prices. Yet, the buy climax on the weekly chart is extreme. Consequently, the Emini will probably pull back 100 – 150 points before the end of the year.
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.