Unemployment report is catalyst for Emini breakout
The Emini gapped up and rallied on the open, but the 1st 3 bull bars had prominent tails on top. While the Emini is Always In Long, this is weak buying. If the bulls do not get a big bull bar closing on its high within the next few bars, the odds will be that this rally is a trap. Because there are 3 consecutive bull bars, the bears will probably need at least a micro double top to create an early high of the day.
At the moment, the bulls have a slight advantage, but not enough to make the Emini clearly bullish. Whenever there is no clarity, traders take quick profits. They try to buy low and look to sell high. As a result, the market goes sideways. Consequently, this is probably a trading range open. Furthermore, it makes another trading range day likely. The bears are getting a reversal down at the moment, but unless they get a series of strong bear bars, the odd favor an early trading range. Then, after an hour or more, the Emini will decide on its 1st swing.
Since there is a lot of trading range trading and most days have been trading ranges, today’s trading range open makes another trading range day likely.
Pre-Open market analysis
Yesterday was a small day in a 3 week trading range. Because the bull trend on all higher time frames is strong, the odds favor higher prices. However, since the weekly buy climax is extreme, the Emini is likely to begin a 100 – 150 point pullback to below the weekly moving average before going much higher.
Today is the unemployment report, which is a catalyst for a breakout up or down. Yet, most days have been trading range days. In addition, the Emini is in a 3 week range. Therefore the odds favor another trading range day today.
Overnight Emini Globex trading
The Emini reversed up at the end of the day after a strong vacuum test of Wednesday’s bull trend low. There was follow-through buying in the Globex session, and the Emini is up 3 points. Because of yesterday’s bull reversal, the odds favor follow-through buying today in the 1st hour or two.
Yet, because of the buy climax on the weekly chart, traders are ready for a strong reversal down on the 5 minute chart at any time. However, because most days over the past month have had early strong selloffs that then reversed up, the odds are that the bulls will continue to buy selloffs. Furthermore, most days have had mostly trading range price action. There is no evidence to make anything else more likely today.
EURUSD Forex market trading strategies
The daily and weekly EURUSD Forex charts are in strong bull trends. Therefore, the bulls will buy the 1st reversal down, even if it is 300 pips to the July 26 low. Consequently, the reversal will be minor on those time frames. Hence, the best the bears can probably get over the next month or two is a trading range.
Yet, the context is good for the bears on the 240 minute chart. It reversed down from a breakout above nested bull channels 2 days ago. While the reversal is minor on the 240 minute chart, it is major on the 60 minute chart. If it leads to a 100 – 150 pip selloff, then the reversal would break the bull trend line on the 240 minute chart. As a result, the bears will sell the next rally. This would then create a possible major reversal setup on the 240 minute chart.
Overnight EURUSD Forex trading
The EURUSD Forex market sold off 50 pips in the past few minutes after the Unemployment Report. The overnight selloff triggered a lower high major trend reversal on the 60 minute chart. However, only 40% of major reversal setups lead to a swing down. The bears therefore need sustained selling for many hours to actually create a major reversal. The context is good since the 240 minute chart is turning down from the top of its channel.
Yet, most reversals fail. Traders will therefore continue to believe that every reversal will be a bull flag until one breaks far below the bull channel. Since that has not yet happened here, the odds still favor higher prices. This is especially true because 1.2000 is just above and it is a strong psychological magnet.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini ended the week around the open of the week. This is the 2nd consecutive doji bar on the weekly chart. While not strong sell signal bars, the context is good. The bears want a failed breakout above last month’s high, and then a move below the weekly moving average. The bulls want the trend up to continue. Yet, the weekly chart is extremely overbought. Hence, the upside is probably limited until after there is a pullback.
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.