End of day comments
The Emini gapped up and pulled back briefly, and then the stock market rallied for for the rest of the day. The rally had many small bars and dojis, and the Emini spent much of the time within tight trading ranges. This reduced the chances of a strong bull trend day and increased the chances of the stock market evolving into a trading range. However, the bulls won and the Emini is in a buy vacuum that is testing the all-time high. It pulled back slightly into the close when Apple failed to close above its prior all-time high (although it did close above its prior all-time highest close).
The Emini is overbought and at the top of a 60 minute bull channel. It is also near the top of the July trading range and the all-time high. This will probably lead to a 10 – 20 point pullback tomorrow or Thursday.
S&P500 Emini intraday market update
Time of update 8:10 a.m. PST.
The S&P500 Emini gapped up again today, but had a weak rally to about 8:00 a.m. The rally is similar to yesterday’s. This increases the chances of an early high of the day. Bull day traders want the bull trend to continue for the rest of the day, but there are many overlapping bars with tails and no big consecutive bull trend bars. This increases the chances that this rally will be a bull leg in a trading range.
Since the 60 minute chart has had consecutive buy climaxes, the Emini is at the top of the 5 minute channel, and it is around the top of the July trading range, the upside is probably limited. Until there is a clear top or a strong bear breakout, the trend up will continue. However, the price action so far is more consistent with a bull leg in a trading range.
S&P500 Emini daily and weekly candle charts
The Emini has rallied strongly off the weekly moving average and is testing the July high, which is the all-time high. Bears will try to turn the stock market down in a double top or other form of major trend reversal. The bear trend reversal can happen abruptly, as it did on October 5, 2012. There are always traders looking to sell around a prior high. Bulls take profits and bears short.
Alternatively, if there is enough buying to overcome this selling, the bulls will get a successful breakout and measured move up. Because the S&P500 is at the top of the weekly channel, the chances are that any upside breakout above the channel will fail and the stock market will reverse down to the bottom of the channel. This means that the Emini is probably in the process of forming a trading range that will probably last several months.
See the weekly update for a discussion of the weekly chart.