Increasing Emini selling pressure will lead to 2350 pullback
Updated 6:50 a.m.
While today opened with consecutive bull bars, they were in the middle of Friday’s 4 hour range. Although the Emini is still Always In Long, the bulls need a breakout. Furthermore, they want a break above the July 3 2436.50 lower high because that is the neck line of a double bottom on the 60 minute chart. That is therefore the most important price for the bulls.
The bears want the lower highs of the past several weeks to continue. In addition, they want a strong break below the month long range.
By opening within Friday’s tight range, the odds favor more trading range trading today, even if there is 1st a breakout up or down. Unless the breakout has a series of strong trend bars, it will probably be a leg in a range instead of the start of a strong trend. This early lack of energy makes a strong trend day less likely. Today will therefore probably be like most of the days over the past month. It therefore will probably have a 2 – 3 hour rally and 2 – 3 hour selloff. It is now deciding which will come first.
Pre-Open market analysis
The Emini reversed up on Friday. Yet, the daily chart has had 10 bear bars in the past 13 bars. Hence, this is increasing selling pressure. It therefore increases the chances of a bear breakout below the month long trading range. Since the weekly chart now has 3 consecutive bear bars, the odds are that the Emini has begun its pullback to the weekly moving average.
June is a sell signal bar on the monthly chart. Therefore the bulls want a break above the June high instead of below the June low. In addition, the Emini has mad several minor lower highs since the June 19 all-time high. This is therefore an early bear trend on the daily chart. Consequently, the bulls want a strong break above one or more of those lower highs to erase some of the bear argument.
The most recent is the July 3 high of 2436.50. That is the neck line of a double bottom bull flag on the 60 minute chart. If the bulls can break strongly above it, they then will probably make a new all-time high. Furthermore, the rally would probably continue to the next major resistance, which is the 2,500 Big Round Number.
Overnight Emini Globex trading
The Emini is unchanged in the Globex market. In addition, it is in the middle of a month-long trading range. Therefore day traders expect reversals every day or two.
Since Friday was a bull trend day, there is a 50% chance of follow-through buying in the 1st 2 hours. Yet, there is also a 75% chance of at least a couple of hours of sideways to down trading that begins by the end of the 2nd hour. Furthermore, Friday was in a tight range for 4 hours. That increases the odds of more trading range trading today.
In addition, if there is a bull breakout, that trading range will probably be the final bull flag. Hence, the bull breakout will probably reverse back down before the rally goes above either they July 3 minor lower high or the all-time high.
Last Friday’s setups
Here are several reasonable stop entry setups from Friday.
EURUSD Forex market trading strategies
The 240 minute EURUSD Forex chart has a 2 day double bottom bull flag. Yet, it is at the top of a 9 day trading range. Furthermore, this is at the top of a 2 year trading range.
The EURUSD Forex market has rallied for 6 months. In addition, it broke above the November 9 major lower high. This weakens the case for the bears who see the 2 year range as a big bear flag. Yet, the bulls need a strong breakout above the 1.1700 top of the range. Otherwise, the odds are that the current 6 month rally will lead to a bear leg in the 2 year range. Furthermore, that bear leg will probably last for at least 3 months.
Since trading ranges resist breakouts into trends, the odds are that this 6 month rally will not be the start of a bull trend on the weekly chart. Yet, the momentum up on the daily chart is strong. In addition, there is 300 pips room up to the top of the range. However, there have been many strong rallies over the past 2 years that have reversed down in the 1.1400 – 1.1500 area. Most have led to trading ranges lasting 2 or more months. Consequently, the current rally will probably reverse down about 300 pips within the next several weeks and then begin a trading range.
Overnight EURUSD Forex trading
The EURUSD Forex market reversed down overnight, but the selloff was only 30 pips. It therefore is a bear leg in the 9 day trading range. I wrote a couple of weeks ago that the chart would probably be sideways for a few weeks. That is still true. Yet, the momentum up on the 240 minute and daily charts still favor a bull breakout within a week or two. While it is within the 9 day range, day traders will mostly scalp, even though the odds favor at least a small bull breakout.
Since it is at the top of the 9 day range, it might break below the July 5 neck line of the 9 day double top. Yet, since trading range breakouts usually fail, that breakout will probably reverse up and form a large High 2 bull flag with the July 5 low.
Because the weekly chart is at the top of a 2 year range, any breakout will probably fail. In addition, the EURUSD Forex market will probably be in a 300 pip range for at least a couple of months.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After a weak rally, the Emini had trend resumption up. However, it reversed down from an expanding triangle top into the close.
The bulls are trying to get above the July 3 lower high. This is because it is the neck line of a double bottom with the June 29 and July 6 lows. If they get above that high, their next target is the all-time high and the 2500 Big Round Number. The bears will try again at a wedge top on the daily chart.
The bears need a strong break below the month long trading range. They are confident that the rally cannot go much further. This is because the weekly chart has not touched its moving average in 34 bars. Since that is climactic, bulls will be hesitant to buy up here until after 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.
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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.
