Emini sell signal bar but after sell climax
Pre-Open market analysis
Yesterday was a 2nd consecutive big bull trend day after an extreme sell climax down to the monthly bull trend line. This increases the chance of higher prices. In addition, the bears will want a micro double top. Consequently, there will probably be at least 2 small legs up. Traders will buy the 1st reversal down.
The importance of the open and high of the week
As I have been saying all week, the open of the week is the most important price this week. Today is Friday. The bulls want the candlestick this week to be a bull bar closing on its high. It would then be a reasonable buy signal bar on the weekly chart for next week for a failed breakout below a 50 bar trading range.
The bears, however, want a bear body. That is less likely after today’s strong rally from a test of the open of the week. They would then see it as confirmation of last week’s breakout. This would increase the chance of lower prices over the next several weeks.
Because the open of the week is so important, if the Emini is within 10 – 20 points of it in the final hour, it will probably get drawn to it to test it again. At the moment, this week will probably close near its high. That means that today will probably be either mostly sideways or a little up.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It therefore might gap up. If so, the gap will likely be small. While the bulls would want a measured move up, most small gaps close within the first hour.
While the week between Christmas and New Year’s typically has lots of tight trading ranges, this time is different. The Emini is reversing up from the most extreme sell climax on the daily chart in its 20 year history. So far, the days have had big swings. That increase the chance of additional big days over the next few days.
The bulls currently have all that they need from this week. If today simply goes sideways here, this week’s candlestick on the weekly chart will be a strong buy signal bar. This increases the chance of a tight trading range today. The bulls have been strong and all they need to do is hold their gains.
The bears want this week to close below its open, but that is very unlikely after yesterday’s rally The open of the week is about 100 points below.
A buy climax means exhausted bulls
Because yesterday was a buy climax, many bulls are exhausted. They will wait for a pullback before buying again. There is therefore a 75% chance of at least 2 hours of sideways to down trading that begins by the end of the 2nd hour.
However, there are magnets above and the 2 day momentum up has been strong. There is therefore an increased chance of another strong bull trend.
After a buy climax, there is usually only a 25% chance of a strong trend day up or down. With the extreme move up or down, the probability is 40% today.
EURUSD Forex tight trading range New Year’s breakout likely
The EURUSD daily Forex chart continues to add bars to its tight trading range. It is about at long as the Breakout Mode Patterns in early 2018 and in the summer. The odds are that the breakout will come soon.
Since Forex markets often begin trends in January, traders need to be prepared to switch to trend trading soon. It is important to note that the longer a tight trading range continues, the bigger the breakout is likely to be.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has been in a 40 pip range overnight. The swings are barely big enough to scalp. Since today is at the top of the 2 month trading range, traders are looking to sell rallies. However, the moves have been small and they continue to scalp.
There is an increased chance of a breakout within the next couple of weeks. Consequently, if there is an unusually big and relentless move above 1.15 or below 1.13, day traders will switch to swing trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini formed a trading range day today. Since it has a bear body, it is a sell signal bar for Monday. Because the week closed near its high, the weekly chart has a buy signal. Conflicting signals usually results in a trading range. That is also likely after the 2 big bull days after the 10 day sell climax.
The odds are that the daily chart has begun a trading range. In addition, Monday will probably have a lot of trading range trading. This is in part because New Year’s Eve is typically a trading range day as well.
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.