Strong Emini rally triggered buy signal after unemployment report
Pre-Open market analysis
Friday was the entry bar on the daily chart for a big High 2 bull flag. It was a strong bull bar, but the bulls need follow-through buying this week. The rally increases the chance of bull trend days this week.
Since the Emini has been in a trading range for 4 months, there is also an increased chance of disappointment. However, the buy signal bar on Thursday, the overall context on the higher time frames, and the strong entry bar on Friday all make higher prices slightly more likely than a bear breakout below the April low.
Overnight Emini Globex trading
The Emini is up 7 points in the Globex session. It might therefore open with a small gap up today. But, small gaps usually close in the 1st hour and are not reliable signs of strength.
Since Friday was a buy climax, there is a 75% chance of at least a couple hours of sideways to down trading today that starts by the end of the 2nd hour. There is also a 50% chance of follow-through buying in the 1st hour. Finally, there is only a 25% chance of another strong bull trend day today. Yet, if the bulls get that big bull trend day, traders will conclude that the 4 month correction is over and that the bull trend is resuming.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart is in a strong bear trend, but oversold. It has fallen in a series of sell climaxes. This is unsustainable and therefore climactic behavior. The bears will begin to take windfall profits and look to sell again around the 20 day EMA. In addition, the bulls will begin to buy for a trade up. The odds therefore favor a 150 – 200 pip bounce starting within a couple of weeks. But, since the 4 week bear channel is tight, the rally will be a minor reversal. This means that the bears will sell the rally to around the 20 day EMA.
Any rally will likely lead to at least a small test down to the bottom of the sell climax. More likely, the 2nd leg down will test the December 12 low around 1.17. That is the bottom of the late 2017 rally and therefore important support. Support is always a magnet.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 80 pips overnight to just below 1.1900 and the January 8 bottom of the buy climax. Both are support levels and the selloff on the daily chart has been unusually climactic. This means that is is unsustainable. Many bears will begin to take windfall profits and the bulls will begin to buy for a bounce.
Will today’s low be the bottom of this leg down on the daily chart? It is too early to know. However, since the selloff on the 5 minute chart overnight was in a tight bear channel, the best the bulls can probably get over the next couple of hours is a trading range. They will begin to buy at and below prior lows for 10 – 30 pip scalps. In addition, rather than selling a breakout below prior lows, the bears will begin to switch to selling 30 – 50 pip rallies to the 1, 2, and 4 hour EMAs, and to around the 1.2000 Big Round Number. The result will probably be a trading range today or tomorrow.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The weekly chart had buy signal bars for each of the past 2 weeks. Since both were bear dojis, they are weak setups. Today’s rally failed 1 tick below last week’s high. Therefore, the weekly buy signal did not trigger. Even if it does tomorrow, the bulls need at least one big bull bar or 2 – 3 small bull bars in the next few days before traders will believe that the 3 day rally will continue.
The next magnet above is the April 18 major lower high of 2718.00. If the bulls can break strongly above that, there will be a 60% chance that the 4 month correction has ended and the bull trend has resumed.
Without that, there is still a 40% chance of a break below the April low. The bears want a reversal down from last week’s high. That would be a small double top on the daily chart.
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.