Emini micro double bottom but minor trend reversal
Pre-Open market analysis
After Wednesday’s sell climax, yesterday was bull trend day. The bulls see it as a buy signal bar on the daily chart for a double bottom with Monday’s low. Their minimum goal is a test of Wednesday’s sell climax high.
But, the month-long bear channel is tight. Therefore, the reversal up will probably not go straight up to 2800. In addition, the 3 week selloff followed a 3 month wedge rally. A selloff from a wedge typically has at least 2 legs sideways to down. Hence, if the bulls get a 1 – 2 week rally, the odds are that it will form a lower high and lead to at least a 1 – 2 week 2nd leg sideways to down.
The bears want any reversal up to be a pullback in the month-long bear swing. However, after a 4 day micro double bottom and a decent bull day yesterday, the odds are against a strong bear day today. This means that today will probably be sideways or up.
Weekly and monthly support and resistance
Today is Friday so weekly support and resistance are important. The week so far is a bear trend bar on the weekly chart. The bears want the week to close on its low, which is more than 20 points below yesterday’s close.
However, the bulls always want the opposite. They would like the week to close above the open. But, that is about 20 points above yesterday’s close. It therefore might be too far to reach today. Consequently, weekly targets might be unimportant today.
Today is the last trading day of the month. Therefore monthly support and resistance are important. Yesterday’s rally got back to the June open. The month is now a perfect doji bar. The June open will be a magnet today. The bulls want the month to close above the open so that the month will be a bull candle stick on the monthly chart. The bears want a bear body and a close below the open.
Overnight Emini Globex trading
The Emini is up 9 points on the Globex chart. Today might therefore gap above yesterday’s high. If the gap is small, it will probably close within the 1st hour. By going above yesterday’s high, the Emini would trigger a buy signal on the daily chart. But, the Emini has been in a tight range for 4 days after a strong selloff. This reduces the chance of a big bull day today.
In addition, after yesterday’s buy climax, the odds favor at least a couple hours of sideways to down trading that begins within the 1st 2 hours. Yesterday’s late selloff might be the start of the trading range.
EURUSD Forex market turning up from bottom of triangle
The EURUSD daily Forex chart is turning up from a triangle bottom after a 2 month sell climax. Last week was a buy signal bar on the weekly chart (not shown). This week triggered the buy signal by going above last week’s high of 1.1677.
The 2 day rally is now within 20 pips of that high. It would be a sign of bullish strength if the bulls can close the week above last week’s high. If they succeed, the week will also close above the open of the week at 1.1665. This would be the 1st consecutive bull bars on the week chart since early February. It would therefore represent a bullish change in the market’s behavior and reduce the chances of a successful breakout below the triangle within the next few weeks.
In addition, it increases the chance of a further rally. Yesterday’s low formed a double bottom with last week’s low. The neckline is this week’s high of 1.1721. The bulls want a breakout above that and then a measured move up. If they get their measured move, they would have a test of the June 14 sell climax high. They then would hope for a 300 pip measured move up to the March 1 low.
That is the breakout point for the 3 month bear trend. Will they achieve all of their goals? They have a 30% chance of achieving all of these goals over the next 6 months. More likely, any rally will stall around the June 14 sell climax high.
Until there is a clear breakout, there is no breakout
Trading ranges resist breaking out of the top or bottom. The past 2 days have been reversing up from the bottom. A bull leg in the 2 month trading range is more likely than a reversal into a bull trend. However, the 2 day rally reduces the chances of a bear breakout.
Even if there is a breakout below the triangle, there is only a 30% chance of a 300 pip measured move down. Therefore, the odds are that the daily chart will continue in its trading range for at least another month.
Traders expect the legs up and down to continue to last 1 – 2 weeks. The 2 day rally is the start of a bull leg. If there is a bull leg, it will more likely lead to a 1 – 2 week sideways to down leg if the rally reaches the top of the 2 month range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart had an 80 pip bull breakout late in the Asian session. It has been in a 40 pip range since. Because this week’s open and last week’s high are magnets above, the odds are that the bulls will try to get a weekly close above both today. They therefore will buy 10 – 30 pip dips, looking for rallies back up to around 1.1670.
The bears want the opposite, and they will sell reversals down from that level for 10 pips scalps. After a strong 2 day rally, the bears will probably not be able to get a bear trend today.
The bulls already have a very big range on the daily chart. In addition, they have already achieved their goal of getting back to near last week’s high. Finally, the 2 day rally is now at the resistance of the 20 day EMA. All of this makes a big rally from here unlikely today. Therefore, there will be a bullish bias today, but probably not a big rally from here.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini triggered a buy signal by going above yesterday’s high. But, the opening rally stalled at the open of the week. The Emini then entered a trading range. The late selloff turned the day into a bear reversal day. It is therefore a Low 2 sell signal bar on the daily chart for next week. However, there is a 5 day tight trading range and therefore more sideways is likely.
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.