Posted 6:55 a.m.
The Emini reversed down strongly from a test of the 60 minute moving average and became always in short on the 2nd bar of the day. The odds are that today will be a bear trend day, but it still might become a trading range day. Less likely, it would become a bull trend day. The initial sell off is strong enough so that bear traders will look to swing trade. Bulls will only scalp unless there is a strong reversal. There is no sign of that yet.
Because the selling has been climactic and it is a second leg down, the bulls might be able to create a channel up that could last for hours. However, without a strong bull breakout, it would be a rally within either a trading range or a bear trend. If the bulls are able to rally, traders will look for either trend resumption down at the end of the day or a bull breakout above the bear flag, creating a late bull trend reversal.
My thoughts before the open: Possible bear trend day
Today is Friday and weekly magnets are the December high of 2088.75, last week’s high of 2094.50, last week’s close of 2093.50, this week’s open of 2089.25, and 2,100.
The Emini has had 7 consecutive bull trend bars on the daily chart, and it is overbought on the 60 minute chart. Today or Monday will probably have a bear body. Since there is an important European meeting this weekend, it makes sense for the Emini to pullback today to get a little more neutral. Also, it has stalled here for several days, which means buyers are not buying up here. The market will then have to go lower to find buyers if the bulls are unable to create a breakout soon. Since this has been a small week, today might also be a small day, but since the market is so overbought, it could be a bear trend day.
Summary of today’s price action and what to expect tomorrow
The Emini had a strong bull trend day and it might see follow-through buying in the first hour or two Monday. Since it ended in a tight channel and with a series of buy climaxes, there is a 70% chance of a 2 hour, 2 legged correction Monday starting within the first 2 hours.
See the weekly update for a discussion of the weekly 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.
