Posted 6:55 a.m.
After 8 consecutive bull trend days, today will probably close below its open. However, it could be a doji day with swings up and down. Yesterday was a buy climax in a bull channel so there is a 70% chance of a 2 hour correction today.
Although the Emini had a selloff on the open and became always in short, and the day will probably close below the open, the follow-through has been weak and yesterday’s bull trend was very strong. This increases the chances that this selloff will be a bear leg in a trading range, and the trading range will probably last at least a couple of hours.
My thoughts before the open: Pullback after a buy climax
The Emini had 8 consecutive bull trend days so the odds are that today will have a bear body on the daily chart. Since the climax took place at the all-time high and just below the target for the weekly measuring gap, it is possible that Friday will be the high for several months. If not Friday, then probably soon.
Summary of today’s price action and what to expect tomorrow
After yesterday’s buy climax, today corrected sideways, as expected, but rallied into the close and created the 9th consecutive bull body on the daily chart.
This is the 9th consecutive bull trend bar on the daily chart, which is very rare. That means it is unsustainable and climactic. The odds of tomorrow closing below its open are probably 70%, but that can happen with another small trading range day, like today.
Yesterday’s rally (Friday) and today’s follow-through resemble the rally of September 13 and 14, 2012. That buy climax was followed by a 10% correction over the next several months. I bring this up because the current monthly chart is so overbought that a 20% correction can begin at any time. Although the bears have failed countless times and probably will this time as well, traders need to be ready for a reversal down, which can be big and sharp. Also, given how overbought the monthly chart, the odds of much higher prices without a 10 – 20% pullback are not high.
The bulls are still in control on all time-frames, but all are overbought. With the daily and 60 minute charts overbought, the Emini will probably pull back for at least a couple of days this week. Because the market did not quite reach the measured move targets around 2110, and today ended with a strong rally, the Emini will try to get there tomorrow. If it fails, then today will form a double top with Friday.
There is still that gap up last week. Any gap down would create an island top, which could lead to a swing down on the daily chart.
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.
