Emini October correction testing January high
Pre-Open market analysis
The Emini broke far below the 5 month bull trend line on Thursday and tested the 6 month bull trend line on Friday. It reversed up strongly from just above the trend line and the September 7 low. The reversal up was strong enough to have follow-through buying early this week.
Last week was an outside down week on the weekly chart. That increases the odds of an inside week this week. This is especially true because Friday’s reversal up was strong and it came from major support. In addition, the daily chart is in a bull trend. Therefore, the odds are against a series of 3 – 5 consecutive big bear days.
However, last week was an outside down week on the weekly chart, and the weekly chart was overbought. Traders should expect more selling for at least another 2 – 3 weeks, even if the Emini goes sideways to up this week. It might even test above a 50% retracement before it has a 2nd leg down.
A reasonable 1st target for the bears is the 20 week EMA, which is just below 2850. Therefore, traders will sell 1 – 5 day rallies.
Overnight Emini Globex trading
The Emini is down 7 points in the Globex market. After 2 exhaustive sell climax days, the odds are against a big bear day today. The Emini will try to rally from the support of the September 7 low. Traders will buy selloffs.
But, after 2 big days down, they will also sell rallies, betting that the 1st reversal up will be minor. Traders buying low, selling high, and taking quick profits should create a trading range for the next 2 – 5 days. Because last week had big swings, today will probably have big swings as well, even if it is in a trading range.
EURUSD Forex possible micro double bottom at support in sell climax
The EURUSD daily Forex chart sold off strongly over the past 2 weeks. So far, today is another bear day.
But, as strong as the selling has been, it is still only about a 50% retracement of the September rally. Furthermore, it is at support. Consequently, the daily chart will probably form a micro double bottom today or tomorrow with Thursday’s low. In addition, the bulls will probably create a 150 pip rally up to the high of Wednesday’s outside down sell climax. That high is 1.1596, so the 1st target is around 1.1600, which is also around the 20 day EMA.
The bears want relentless selling to far below the August 15 low of 1.1301. They have a 30% chance of success. Today is in the middle of a 6 month trading range. The odds are that the selling will stop this week. In addition, the bulls will probably get a 150 pip bounce.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 70 pips overnight. Since the selloff is testing last week’s low, it is at support.
The 5 minute chart has been in a 25 pip range for the past 5 hours. The bears are beginning to take profits and the bulls are beginning to buy at support on the daily chart.
Even though the overnight bear channel was tight, most of the bodies were small. In addition, most bars had prominent tails and overlapped the prior 2 – 5 bars. This looks more like a bear leg in a trading range than a bear trend.
Since the daily chart has begun to form a trading range over the past 4 days at support, the odds are that the 5 minute chart will begin to spend more time in trading ranges this week.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed down on the open from a lower high and a test of Friday’s close. It broke below Friday’s low, which was the low of last week. However, it found support at the September 7 low and entered a trading range. Since the open of the day was in the middle 3rd of the day’s range, it was a magnet at the end of the day.
Yet, it did not stop the rally. The reversal reached a new high of the day and the 60 minute EMA. Today is a buy signal bar for tomorrow. But, after 2 big bear days, any reversal up will probably be minor.
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.