Emini island top and weekly gap below
Pre-Open market analysis
Because the Emini gapped down yesterday after Tuesday’s gap up, it formed a one day island top. If it were to gap down again today, it would form a 3 day island top. This is not likely because of the Globex rally. In any event, since the Emini is in 6 month trading range, island reversals are usually minor.
Yesterday was the 1st pullback in a 6 bar bull micro channel on the daily chart. It is therefore a High 1 bull flag. But, it has a bear body and there are targets below. This is a weak buy setup.
There is a parabolic wedge top on the 60 minute chart and yesterday was the 1st leg down. Therefore, the Emini will probably pull back more for a day or two. It might test the neck line of the head and shoulders bottom on the 60 minute chart within a week. That target is below 2750.
This week gapped up on the weekly chart. Since at least slightly lower prices are likely after the wedge top on the 60 minute chart, the weekly gap will probably close within 2 weeks.
Overnight Emini Globex trading
The Emini is up 15 points in the Globex session. It might therefore gap up today. However, yesterday was a bear day and a weak High 1 buy signal bar. In addition, if today gaps up, the gap will be small. Small gaps usually close in the 1st hour or two. Finally, the wedge top on the 60 minute chart is likely to have a 2nd leg down from a lower high. Therefore, the odds are against a big bull trend today.
Yesterday’s bear trend was weak. While at least a small 2nd leg down is likely on the 60 minute chart, the odds are against a big bear trend today. More likely, yesterday was a Big Down move on the 60 minute chart after a Big Up move. That creates confusion and usually results in a trading range. Therefore, today will probably be another sideways day on the 60 minute chart. This makes a big trend up or down less likely on the 5 minute chart.
EURUSD Forex pullback in bear rally
The EURUSD daily Forex chart sold off for 3 days from around the EMA and the June 14 high. But, the selloff so far lacks consecutive big bear bars. In addition, it is around a 50% pullback from the June 9 rally. Finally, the June 14 sell climax high is a strong magnet. Therefore, the selloff will more likely stall and become a higher low in the 2 month trading range.
The bulls will buy a micro double bottom between 1.1600 and 1.650 over the next week. They will look for a test of the June 14 high at around 1.1850. The odds are that the bear rally will continue up to the May 14 high and 1.2000 over the next couple of months.
The bears will probably need to get to the June 14 sell climax high before they can resume the bear trend. However, if they get 2 closes below the June 21 low, then traders will expect a 300 pip measured down below the 3 month range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart was in a 20 pip range during the Asia session. The range expanded to 30 pips in Europe. This represents weak follow-through selling after Wednesday’s bear trend.
Because the daily chart is now around a 50% retracement of the 4 week rally, bulls are beginning to buy. This is the buy zone. There is therefore an increased chance of a bull trend day today or tomorrow. More likely, yesterday’s selloff created a Big Up, Big Down pattern on the daily chart. That usually results in at least a few sideways days.
It is unlikely that the bear trend is resuming on the daily chart. But, if the bears get 2 – 3 consecutive big bear days, the 2 month trading might be ending. Traders will swing sell in the unlikely event of a big bear trend day today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After a brief sharp selloff, the Emini rallied in a bull channel to above the 2800 Big Round Number. It then entered a tight trading range. A more important target is the March 13 high of 2811.00. That is the top of the 6 month trading range. If the bulls can rally 10 – 20 points above it, the rally will likely make a new all-time high.
The bears will try to continue the 6 month range. Even if there is a small breakout above the March 13 high, the bears will sell. Therefore, traders are looking for either a reversal down from this level or a strong breakout above. Either will likely continue for at least a month.
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.