Emini unlikely to create outside up candlestick on weekly chart
Pre-Open market analysis
The Emini gapped up yesterday and created a 1 day island bottom. While yesterday was a bull trend day, it closed below its high. But, the momentum up good enough to make traders believe that the 6 day pullback has ended. However, the bulls need to get above the August high.
Today is the last day of the week. If it is a big bull trend day, it could get above last week’s high. This week would then be an outside up bar on the weekly chart. While unlikely, that would be a sign of strong bulls and increase the odds of a new all-time high soon.
The other weekly magnet is the open of the week. If the bears can get a close below the open, the week would have a bear body. That would make it a weaker buy signal bar for next week.
Overnight Emini Globex trading
The Emini is down 7 points in the Globex market. If it gaps below yesterday’s low, yesterday will be a 1 day island top. Wednesday was a 1 day island bottom, and last week’s gap down created a 3 day island top. This confirms the point that I often make that islands tops and bottoms are usually not major reversal patterns.
Today is Friday so weekly support and resistance are important. If the Emini is within about 5 points of a weekly magnet in the final hour today, it might get drawn to that magnet.
The bulls want the week to be a bull reversal bar on the weekly chart. They therefore will try to make today close above the 2837.00 open of the week. They would prefer the week to close on its high.
The bears always want the opposite and therefore want the week to close below its open. Furthermore, last week was a sell signal bar on the weekly chart. The sell triggered this week. The bears want this week to close below last week’s 2826.00 low. That would increase the chance of another week or two of sideways to down trading. If the bears get that, they will hope for the start of a swing down on the weekly chart.
EURUSD Forex small bear flag after parabolic wedge sell climax
The EURUSD daily Forex chart broke far below a 3 month trading range in a bear trend. The bulls want that trading range to be the Final Bear Flag. They are trying to create a trend reversal up.
However, the buy signal bar from 2 days ago was small and weak. In addition, the rally so far is also weak. Also, the momentum down has been strong and there is a measured move target at 1.12. This reversal therefore more likely will be a bear flag. Traders are deciding on the size of the bear flag.
It might end today or Monday and be a double top with the bull bar of 5 days ago. Alternatively, the bear rally could continue up for a week or two and reach the June low. That is the bottom of the 3 month bear flag. It is also at the 1.15 Big Round Number and the 20 day EMA.
In either case, the odds still favor a test of the 1.12 measured move target and a stronger bottom. Therefore, traders will sell this rally. In addition, the bulls will only scalp on the daily chart until there is a credible trend reversal up.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 40 pip range overnight. It reversed down from a test of the high from 5 days ago. Since it has been in a trading range for 5 days, the odds favor more trading range trading today.
The most important price today is 1.1374. That is the open of the week. Today is Friday, and today’s close determines the appearance of the weekly chart. If today closes above this week’s open, the candlestick on the weekly chart will be a bull trend reversal bar. The bull body would increase the chance of higher prices next week. This is especially true if today closes at the high of the week.
The bears want a bear body on the weekly chart. They therefore will sell rallies and try to get the week to close below its open.
Since the weekly chart has 3 big bear bars, a small bull reversal bar this week is not too important. It would still probably only lead to a minor reversal up and lead to a bigger bear flag. After such a strong bear breakout on the weekly chart, the bulls will probably need a micro double bottom before they can create a bull trend. That would require another small leg down, which means at least a couple more weeks of selling after this bounce.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off on the open and reversed up from the 60 minute EMA, the open of the week, and the gap below yesterday’s low. After a higher low major trend reversal, it broke above yesterday’s high. Furthermore, it closed last week’s gap down. These all make higher prices likely.
Finally, the week closed near its high. Therefore, the candlestick on the weekly chart is a High 1 bull flag for next week. Next week will probably trade above this week’s high and trigger the buy signal. The rally might even make a new all-time high.
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.