Emini expanding triangle bottom or test of February low
I will update around 6:43 a.m.
The Emini had a huge gap up and opened with 2 strong bull bars. This reduces the chances of a bear trend day. However, the Emini is far above the average price. Many bulls want to buy closer to the average price. Consequently, the odds are that the Emini will be sideways for an hour or two until it gets closer to the EMA. The bulls will look to buy a wedge bull flag or a double bottom pullback to around the moving average.
The Emini is Always In Long. The odds favor either a bull trend day or a trading range day. There is a 20% chance of a Trend From The Open bull trend that has 5 – 10 consecutive bull bars. If so, the Emini will probably then go sideways for several hours and possibly the rest of the day.
Pre-Open market analysis
The Emini sold off strongly for 2 weeks. Friday was the 3rd consecutive day with a bull reversal that failed. The bears got a good follow-through bar on the daily chart on Friday. That increases the chance of at least a small 2nd leg down after the 1st bounce up this week.
If the bulls get a reversal up this week, they will have a higher low and an expanding triangle since the February 16 high. While the current selloff is strong, the odds favor a new all-time high in late April or May. This is because the monthly chart is so strongly bullish.
Overnight Emini Globex trading
The Emini is up 30 points in the Globex market. It will therefore gap far above Friday’s close. When there is a big gap up, there is an increased chance of a trend day up or down. If there is a trend, it will more likely be up.
The bears will try to keep any rally from breaking strongly above Friday’s high. Therefore, day traders will look for a reversal down from below, or even just above, Friday’s high.
If today fails to break above Friday’s high or below its low, today will be an inside day. If today closes near its high, it will be a buy signal bar on the daily chart for an expanding triangle. The Triangle began with the February 16 high. I showed this in the weekend report.
While a rally today is good for the bulls, the 2 day selloff was extreme. The odds are that the bulls will need at least a micro double bottom this week to begin a rally up to a new all-time high.
I have been saying for weeks that the odds favor a new high by around the end of April, or maybe in May. If today is a strong bull day, and tomorrow is another strong bull day that erases the huge 2 day selloff, this will likely be the start of a strong rally up to a new high.
In addition, it could be very fast because the 2 day selloff will then be a bear trap. Bears will have been trapped into selling, and bulls will have been trapped out of buying. Both will be desperate to buy at any price. This can create a very quick move up.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has been in a trading range for 3 months. The rally of the past 4 days is a breakout of the top of a 3 week wedge bull flag.
The EURUSD daily Forex chart is forming a 2nd leg up from the March 1 low. Trading ranges often have 2 legged moves that test the bottom and top and then reverse. Yet, the weekly chart is in a bull trend. In addition, there is a bear trend line around 1.2650, which is a magnet above. While trading ranges are mostly neutral, those 2 factors make a bull breakout more likely.
However, most breakout attempts fail, even if ultimately a bull breakout is probable. Therefore, it is more likely that this 4 day rally will fail to break strongly above the range.
Traders will look for a reversal down from either the March 8 high or the top of the range. Until there is a breakout, there is no breakout. No matter how strong a leg up or down is, the odds still favor a reversal. Just look back over the past 3 months. There have been several strong legs up and down that reversed, despite the strength.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 60 pips overnight. It is breaking above a 3 day bull channel. Since most bull breakouts above bull channels fail, the odds are that this rally will reverse early this week. Furthermore, it is now testing the March 8 top of a 4 week trading range. That is resistance.
The bulls want the overnight breakout to be successful. So far, the breakout is not very big. They have a 40% chance of it leading to a 100 pip measured move up, based on the height of the 4 day rally.
The probability will be higher if any pullback over the next 2 days stays above Friday’s high. That would create a gap on the 60 minute chart. It would therefore be a sign that the bulls are strong.
If instead there is a reversal that drops 10 pips or so below Friday’s high, then the bull breakout will likely fail. That would lead to at least a few days down.
If the bulls break 30 pips or so above the March 8 high, they will probably get a test of the top of the 3 month range. That is around 1.2550. If they break above that, the next target is the monthly bear trend line around 1.2650.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was the 4th consecutive bull reversal day. Unlike the past 3, today was successful. It was a huge bull reversal day that closed on its high.
Today was the 4th consecutive attempt at a bull reversal day. The prior 3 failed and closed on their lows. The bulls succeeded today, and broke above Friday’s high.
Today was a bull trend day and it is a 2 bar reversal with Friday. It is therefore a buy signal bar for tomorrow for a failed breakout below the March 1 low. If tomorrow gaps up, it will create a 3 day island bottom. However, since today followed 2 big bear bars, the bulls will need a big bull day tomorrow to convince traders that the 2 month correction is over and that the rally to a new all-time high has begun.
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.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.
