Time of update 7:41 a.m. PST.
The Emini is having a breakout mode trading range open. The Emini closed the gap below yesterday’s low and reversed up. This might be the start of a second leg up, even though the pullback from yesterday’s high does not appear to have enough bars compared to the size of the 5 day wedge bottom. There is usually more symmetry when the market forms the right side of the pattern (a higher low major trend reversal, which is a head and shoulders bottom). This means that the Emini might have to go sideways to down for another day or two.
The S&P500 Emini is in breakout mode for day traders. Day traders are waiting for a breakout up or down. Once it forms, they then will look for a pullback and a second leg. Since the opening range is big, the breakout might not go far enough to create a measured move based on the entire opening range. However, it could fall for a measured move based on the high of the day to the open of the day. If so, the open will be a magnet at the end of the day, and the day could become a large trading range day, forming a doji bar on the daily chart.
At the moment, this big trading range open will probably lead to a small trend day or a trading range day. If the breakout is big enough, however, the day could become a trend day.
Higher time frames
The Emini rallied for a day and a half up from a wedge bottom that lasted 5 days, and then it pulled back yesterday at the 20 bar exponential moving average on the daily chart. A wedge bottom trend reversal usually has a second leg sideways to up. The pullback might continue today. Whether it ends today or tomorrow, it probably will be followed by a second leg sideways to up. The bulls will see that reversal up as a higher low major trend reversal (the right shoulder of a head and shoulders bottom). The top of the first leg up, which was yesterday’s high, was just above last week’s high, which is a 60 minute lower high. The bears hope that this double top leads to a breakout below last week’s low and then a measured move down. If the second leg up stalls again at last week’s high, the Emini will have created a large triangle, which can breakout in either direction.
The S&P500 Emini higher time frame charts (60 minute, daily, and weekly) still look like they will have a second leg down once the 5 minute two-legged rally is finished.
See the weekly update for a discussion of the weekly chart.