Emini October bull trend reversal stalling at EMA
Pre-Open market analysis
The Emini formed an outside down day on Friday after a rally to the 20 day EMA. Because the rally followed a parabolic wedge sell climax, there will probably be buyers below. Sell climaxes usually lead to at least 2 legs sideways to up, and last week was the 1st leg up.
The bears want a resumption of the bear trend. They see last week as a pullback to the moving average in a bear trend. Because Friday was outside down at resistance, it is a sell signal bar for today. But, since there will be buyers below, the bear will likely only get a 2 – 3 day minor reversal down.
If today gaps down, it would create a 3 day island top. But, island tops are minor reversals, so there is no special importance to a gap down today. The bears would need 2 – 3 big bear days to make traders believe that the bear trend is resuming. More likely, the 3 week trading range will continue.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. That huge bull bar late on Friday is more likely the start of at least a small 2 legged rally than a bull trap. Therefore, there is a slightly increased chance of a bull trend today.
But, because the Emini was sideways for most of Friday, and tomorrow’s election creates uncertainty, the odds are against a big trend up or down. Therefore, today will probably continue Friday’s trading range price action.
The bulls want a rally that breaks above last week’s high, which was Friday’s high. That would trigger a buy signal on the weekly chart. The tail on the top of last week’s candlestick is a sign of a lack of conviction. Consequently, it is a weaker buy signal bar. As a result, there is less chance of a strong rally above Friday’s high this week. More likely, the Emini will continue to only get 2 – 3 days in one direction before reversing, as it has been doing since the October 16 bull trend day.
EURUSD weekly Forex chart has double top and double bottom
The EURUSD weekly Forex chart has sold off for 2 months. The 6 weeks down from the September 24 high have been in a tight bear channel. Typically, the bulls will need at least a micro double bottom before they can get a leg up.
This is especially true with last week being only a doji bar. That is a weak buy signal bar. It is usually not a strong enough foundation to support a rally after a strong selloff. Consequently, there are probably more sellers than buyers above last week’s high.
However, there is both a double bottom and a double top since July. That means that the weekly chart is still in a trading range. It is therefore still in Breakout Mode. Since most trading range breakouts fail, there are probably more buyers than sellers below last week’s low. In addition, if there was a 100 point bear breakout, the bulls would try to create a reversal up from the bottom of a wedge bull flag that began in November, 2017.
Unless the bulls get a very strong reversal up over the next few weeks, any rally will probably be minor. At the moment, the odds favor a breakout below the double bottom and then a reversal up.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart had a weak 50 pip selloff over night. By falling below Friday’s low, it triggered a sell signal on the daily chart. Because Thursday’s rally was strong, there will probably be buyers below Friday’s low. That is why the overnight selloff has had so many sideways bars with big tails. It is more likely just a test of Friday’s low than the start of a breakout below the 3 month double bottom.
Thursday’s rally was strong enough to get a least a small 2nd leg sideways to up. Therefore, the odds are that today or tomorrow will begin a 2 – 3 day rally.
Since the momentum down on the weekly chart is strong, the bears will sell the 2 – 3 day rally. Unless there is a very strong rally, there will probably be a break below the October low in November.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini was in a broad bull channel today. It was also a bull inside bar on the daily chart. There is now an ioi breakout mode setup in the middle of a month-long trading range. The bull body and last week’s rally give the bulls slightly higher odds. But, with tomorrow night’s election results, Wednesday has a 50% chance of reversing any breakout up or down tomorrow.
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.