Emini sell climax at September low for minor reversal up
Pre-Open market analysis
Yesterday was a bull trend reversal day at support. It reversed up after breaking below the September low, the bottom of the bull channel, and last week’s low, which was also Friday’s low. It closed on its high and is a buy signal bar for today. However, last week’s selloff was strong. There, the odds favor a minor reversal up to a lower high instead of a resumption of the bull trend on the daily chart.
Overnight Emini Globex trading
The Emini is down 13 points in the Globex session. It will therefore probably open in the middle of yesterday’s range. Since yesterday was a buy climax, there is a 75% chance of at least a couple hours of sideways to up trading today starting by the end of the 2nd hour. With the big gap down, it will probably begin on the open.
The past 3 days had early big selloffs and then reversals up. They formed a wedge bottom, and yesterday’s midday rally might be the start of 2 legs sideways to up. Consequently, the bulls will be looking for an early low of the day and a swing up.
Since the Emini has probably begun a move down to 2800 on the daily chart, day traders need to expect big downside surprises. Therefore, if today breaks strongly below yesterday’s low, it might create a failed break below the 3 day wedge bottom. The result could be a big bear day. However, the odds favor sideways to up today.
EURUSD Forex strong bear leg in 6 month trading range
The EURUSD daily Forex chart has been selling off for 3 weeks after forming a double top with the July 9 high. There is a 40% chance of a strong breakout below the August 15 low. Trading ranges have strong breakout attempts up and down, and this one has had many. While ultimately there will be a breakout, betting that any one leg will be the one that succeeds is a low probability trade. It is easier to make money looking for reversals near the top and bottom.
The daily chart is now in the bottom third of the 6 month range. There still is room to the bottom at 1.13. Therefore, the bears will continue to sell as long as the momentum down is strong. However, the chart is in the buy zone. The bulls are looking for a reversal up. They need a strong buy signal bar for a Final Bear Flag reversal up. The 2 day pullback last week is a potential Final Flag. Alternatively, they will need a micro double bottom. They will wait for a bull day and then look to buy.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart had another leg down overnight. It fell in a channel that had 3 legs. This is therefore a Spike and Channel bear trend. Typically, there is a reversal up and a transition into a trading range. Day traders will look for that today.
Since the daily and 60 minute charts are oversold and the daily chart is in the buy zone, the 5 minute chart will probably not fall much further today. But, the overnight bear channel is tight. That typically limits rallies. The odds therefore favor a 50 pip trading range today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied from a higher lower major trend reversal. It triggered the buy signal on the daily chart by going above yesterday’s high. But, it spent the day in a trading range and failed to close above yesterday’s high.
The bulls might get another day or two of higher prices, but last week’s selloff was strong. Furthermore, the 20 week EMA is not far below and it is an important magnet. Therefore, the odds are that any rally this week will form a lower high. The Emini has probably begun a test of 2800.
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.