Emini strong bull trend resumption entering sell zone
The Emini reversed up from yesterday’s low and the 60 minute EMA on the open. The bulls want a double bottom and a break above yesterday’s lower high, which is the neck line. A measured move up from there would break above last week’s high and trigger the weekly buy signal. That is unlikely today, but it is likely this week.
The bears want the opening buying to fail and reverse down from below yesterday’s high. They want an early high of the week and no break above last week’s high. Instead, they want a reversal down and for this week to be another inside week. At the moment, that is unlikely.
The 3 big bull bars on the open made the Emini Always In Long. Yet, the bulls need a strong break above yesterday’s high to convert the 2 day pullback into a bull trend. The Emini is currently either in a bull trend or a bull leg in a trading range day. If they get a strong break above yesterday’s high, today will probably be a bull trend day. However, the odds are against a strong trend day.
Pre-Open market analysis
The Emini reversed up strongly last week and the selloff has probably ended. Yet, the rally is now in the middle of the collpase. This increases the chances of a 2 – 5 day pullback. There is only a 30% chance of a double top bear flag with the February 7 high on the daily chart.
More likely, the odds are that bulls will buy the selloff and create a higher low. Since a trading range is likely, the pullback might be deeper than what the bulls were expecting. A 50% retracement down to the February 14 low is a reasonable target if the Emini is in a trading range. If it is still in a bear trend, it will break strongly below the February 9 low. This is not likely at the moment. If the 9 year bull trend is resuming, the rally will have only a 1 – 3 day pullback before it continues up to the all-time high.
Trading range likely
Big Up, Big, Down, Big Up creates Big Confusion. Therefore, a trading range for at least another month is most likely. This means that most days will have a lot of trading range trading.
Finally, after 6 consecutive bull bars on the daily chart, the odd are that there will be buyers below Friday’s low. This means that the best the bears will probably get over the next couple of days is a pullback. They will probably have to wait for a test of Friday’s high and a micro double top before they can get a 50% retracement of the 6 day rally.
After 6 days in a tight bull channel, the Emini reversed down on Friday. The rally is stalling around the February lower high, the daily EMA, and a 50% bounce. This increases the odds for a few days of sideways trading.
Last week was a strong buy signal bar on the weekly chart. The odds are that this week will trade above last week’s high and trigger the buy signal. Alternatively, it could be another inside bar.
While the weekly and monthly charts are in bull trends, the 2 week selloff was very strong. This increases the odds that this week will not be a strong entry bar for the bulls if it trades above last week’s high. This means that it will either have a small bull body on the weekly chart, or a prominent tail on top. Consequently, there will probably not be relentless buying again this week. The Emini will likely begin to go sideways.
Overnight Emini Globex trading
The Emini is down 9 points in the Globex session. It is around Friday’s low. Friday was the 6th consecutive bull trend bar on the daily chart in a 6 day bull micro channel. This represents strong buying. Hence, the bulls will probably buy the 1st 1 – 3 day reversal. Consequently, there will probably be more buyers than sellers below Friday’s low. As a result, today will probably not be a big bear day.
Furthermore, the 60 minute chart has not tested its 20 bar EMA in more than 20 bars. This means that the bulls have been willing to pay above an average price for a long time. They will therefore probably be happy to have an opportunity today to buy around the average price. This further limits today’s downside.
The 6 day strong bull channel transitioned into a bear channel on Friday. Bear channels often last a few days. Therefore, the 60 minute chart might go sideways for another couple of days.
Finally, as strong as the 6 day rally was, it was also a buy vacuum test of resistance. That resistance is the February 14 lower high and a 50% pullback from the selloff. This reduces the chances of a big bull day today. With neither a strong bull or bear day likely, today will probably mostly be sideways.
EURUSD in middle of month-long trading range
As I have been saying for the past couple of weeks, the EURUSD daily chart would probably be in a trading range for at least a couple of months. It is testing resistance at the bottom of a 10 year trading range on the monthly chart. In addition, it is just below a monthly bear trend line. Finally, the bears are trying to form a 2 year wedge bear flag.
It is important to understand that I have been saying trading range and not the start of a bear trend. While a trend up or down can begin at any time, the momentum up on the weekly chart has been strong for over a year. The bull channel is tight. This makes a reversal into a bear trend unlikely. In addition, there is still room to the bear trend line, which is above 1.2650. Therefore the 5 week tight trading range is still more likely to least to at least slightly higher prices than to a bear trend.
Alternatively, if it does sell off from the micro double top on the weekly chart, a trading range down to the 1.1500 area at the November low is still more likely than a bear trend. This is true for at least a few months. The bears will probably need to create many big bear bars on the weekly chart before traders believe they can take control.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has sold off for 200 pips over the past 3 days. It is now in the middle of the month-long trading range. Furthermore, this is about a 50% retracement of the 6 day rally. Because the bear channel is tight, the bulls will need 2 – 3 days of a trading range before they can again test the 1.2500 resistance. Since a 50% pullback and the middle of a trading range are support, the 3 day bear trend on the 5 minute chart will likely transition into a trading range today. The market will then decide between another test of the 1.25 top or a test of the 1.22 bottom of the range. Trading ranges tend to spend most of their time in the middle. Consequently, the EURUSD market might go sideways for several days here.
The 2 tight bear channel make a strong bull trend unlikely. Most channels end around the 3rd day. That is another reason why today will probably not be another big bear day.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was an outside up and outside down day, and the 3rd day in a tight trading range. The 6 day rally is stalling at the February 7 major lower high. The odds favor at least a small 2nd leg up after the current pullback ends. The Emini is currently testing 2700.
The bears want a deeper pullback this week, and they want to prevent this week from triggering the buy signal. Whether or not they succeed, the odds favor at least one more leg up on the daily chart, even if the pullback before then is deep.
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.