Emini weak bull trend resumption but trend line below
Pre-Open market analysis
The Emini gapped up yesterday, but formed a small trading range day. This is weak follow-through after Tuesday’s bull reversal. If the bulls do not get strong buying in the next few days, the Emini will probably reverse down from a lower high. The target for the bears is the bottom of the bull channel.
Today is Friday and therefore weekly support and resistance are important. Because the week is small, its high, low, and open are magnets, as are last week’s high and low.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. If it gaps up, the gap will be small. Small gaps usually close in the 1st hour.
Since yesterday was a small day, there is an increased chance of an outside down day. This means that the Emini has an early reversal down from above yesterday’s high followed by a break below yesterday’s low.
Most days over the past 3 weeks have been sideways with legs up and down. That is therefore likely again today, especially with yesterday being a small day.
However, because the daily chart is testing the resistance of the January high, there is an increased chance of a big trend day up or down. If there is a strong breakout in either direction, day traders will be willing to hold their swing trades all day if the trend continues.
But, the odds favor another mostly sideways day. Day traders will expect reversals. They will also expect the Emini to get drawn to weekly support or resistance in the final hour.
EURUSD Forex top of 3 week and 5 month trading ranges
The EURUSD daily Forex chart is at the top of a 5 month trading range. There have been many strong legs up and down in the 5 month range. Most trading range breakout attempts fail, even when they are strong. Therefore, the odds are that the daily chart will reverse down for several days starting within the next few days. This is true even if the rally breaks above the July 31 top of the sell climax.
The late August bull trend reversal was strong and the weekly chart is in a bull trend. Therefore, there should be a successful break above the trading range and a 50% retracement of the 7 month selloff.
However, picking which breakout attempt will succeed is a bad way to trade. Until there is a clear breakout, it is better to bet on reversals. Therefore, traders will look for sell setups now that the rally is at the top of the 5 month range. Since all legs up and down have reversed within 3 – 5 days, they will look for a trade down and not a bear trend.
Once there is a strong breakout above the June 14 1.1851 high, traders will look for a move up to 1.20. However, the 5 month trading range could last for more than a month before that happens.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight. It reversed down from just below the August 28 lower high. The bears want the series of lower highs since June to continue. But, the daily chart is now in a bull trend. Therefore, there will soon be a move above the July 31 high.
Because the daily chart is at the top of its range, day traders will sell rallies, looking for at least a 100 pip reversal down for a few days. However, since the 5 day rally has been strong, they will buy pullbacks as well. They know that the leg down will probably need a micro double top. Therefore, the 1st down move will likely last only 1 – 2 days.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off from above yesterday’s high, but reversed up from just above yesterday’s low. It was a trading range day. The tail below the bar on the daily chart makes it a weak sell signal.
A gap down next week would create an island top. If instead the Emini just sold off and closed the gap above Thursday’s high, the gap would be an exhaustion gap. But, island tops, island bottoms, and exhaustion gaps are minor reversal patterns. The odds are against a bear trend on the daily chart at the moment.
A selloff next week would create a micro double top on the weekly chart. Since the weekly bull trend is strong, the reversal would be minor.
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.