Emini reaction to election more important than election result
Pre-Open market analysis
The Emini triggered a buy signal on the daily and weekly charts yesterday. The odds are that the October low will be the low for the rest of the year. Yesterday’s rally and the October bull trend reversal are strong enough to make a test of the October 17 high likely in November.
As for whether it would have been better for the market if the Republicans maintained control, that is nonsense. The only thing that matters is what the institutions will do in response to the result. No matter what the election outcome, its effect will probably be brief. Washington is doing very little harm and very little good.
The technical picture is more important. The bulls have a strong reversal up from a wedge bottom on the daily chart. Therefore, the odds are that there will be at least 2 legs up. That means that traders will buy the first selloff. Also, they will look to sell near the October 17 high at the start of the parabolic wedge bear channel.
Overnight Emini Globex trading
The Emini is up 20 points in the Globex session. There will therefore probably be a big gap up today. Since the open will be far above the EMA, the bulls will probably not be able to get a strong bull trend on the open. Traders hesitate to buy when the price is far above average. Consequently, today will probably have a trading range open for the 1st hour where the Emini trades sideways to down to near the EMA. If today will be a bull trend day, the bulls will try to form a double bottom or wedge bottom near the EMA. The bulls will look for a reversal up.
Since the Emini will probably have at least a minor leg down in the 1st hour, the bears are hoping for a strong bear trend day. But, yesterday’s late rally was strong. Consequently, even of the bears get a strong selloff on the open, the odds are that it will be a minor reversal down to around the EMA. A trading range is more likely than a bear trend in the 1st hour. However, if the bears can continue the trading range for 2 hours, they then would be able to create a credible major trend reversal setup for a possible reversal down later in the day.
Will the gap up close today? It might, but yesterday’s strong rally and today’s gap up make it likely that the bulls will buy the selloff, even if it falls below yesterday’s high.
EURUSD daily Forex chart has strong minor trend reversal
The EURUSD daily Forex chart has a big bull trend day so far today. The bulls want today to close above Friday’s lower high. They then would view today as a measuring gap. The measured move would be around the 1.16 Big Round Number and the October 16 major lower high.
The bears always want the opposite. They therefore want today to close below Friday’s high. That would increase the odds of a 2 – 3 day pullback. Because the 5 day rally has been strong, the bulls will probably buy the 1st leg down. Consequently, the bears will probably need at least a micro double top if they are to break below the August/October double bottom.
So far, this rally has lacked consecutive big bull bars. If today closes below Friday’s high or if tomorrow has a bear body, there will probably be a 100 pip pullback within a week. Alternatively, if today closes on its high and tomorrow has a bull body, the rally will probably go up to the October 16 high with only 1 – 2 day small pullbacks.
EURUSD Forex daily chart still in 6 month trading range
Even though the bulls are reversing up from a 2 month double bottom, the rally is within a 6 month trading range. It is therefore more likely just another leg in the range rather than the start of a bull trend. Consequently, the bulls will probably only be able to maintain control for a few weeks before the bears regain control for 2 – 3 weeks. There is nothing to indicate that this is about to change.
EURUSD Forex weekly chart has minor buy signal
By going above Friday’s high, which was last week’s high, the EURUSD weekly chart triggered a buy signal. However, the buy signal bar was just a doji bar and the 6 week selloff was in a tight bear channel. This is a weak buy setup. Consequently, the rally will probably only last 1 – 2 more weeks before the chart begins to go sideways. This is consistent with the daily chart, which will probably pull back for several days within a week.
Overnight EURUSD Forex trading
After rallying 70 pips overnight, the EURUSD 5 minute Forex chart has been sideways for 4 hours. The key price today and tomorrow is Friday’s high of 1.1458. The chart is now 25 pips above it. The bulls want both days to close above it, and the bears want one or both days to close below it.
A close above increases the odds of several more days straight up. Because the daily chart is in a trading range, it is more likely that there will be a close below today or tomorrow. This is because trading ranges repeatedly disappoint bulls and bears who are hoping for strong trends.
The rally should continue up to the October 16 major lower high above 1.16 within 3 weeks. But, because the daily chart is in a trading range, the 5 minute chart will spend a lot of time in trading ranges as well. The bulls hope that the 4 hour trading range is a bull flag and that there is a late rally today. More likely, the range will continue, or there will be a minor reversal down to Friday’s high.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped up, formed a small wedge bull flag, and rallied in a Small Pullback Bull Trend. As strong as the rally was, it could not reach the October 17 major lower high of 2819.25.
While the odds favor a test of the October 17 major lower high within a few days, that is major resistance. Consequently, the rally will probably stall there for at least a few days. However, since the rally is exceptionally strong, the bulls have a 30% chance of a strong break above that high this week.
The bears want a double top with that high. However, the October low will likely be the low for the rest of the year. Therefore, even of there is a sharp selloff from the double top, the bulls will buy it. A higher low and 2nd leg up are more likely than a break below the October low.
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.