Emini is likely beginning Trump 150 point, 5 percent correction
Updated 6:45 a.m.
Friday had a bear channel after a strong rally. The odds favor a bull break above the bear trend line today. In addition, Friday’s rally was strong enough so that its high is a magnet. Therefore, the Emini will probably test that high to day or tomorrow.
Today opened just above Friday’s low and at the bottom of the wedge bear channel. The bulls are trying to create a higher low major trend reversal after Thursday’s bear trend. However, Friday was in a relatively tight bear channel. Therefore, the 1st reversal up today will probably be minor. The odds are that the bulls will need a double bottom with the low of today before they can create a bull trend day.
Today is beginning with a trading range open. At the moment, the bulls will probably buy here or below Friday’s low. The downside is probably not great. Furthermore, since the bulls will probably need a double bottom, the upside is not great either for the 1st hour. The odds therefore favor a trading range open or a reversal up from around Friday’s low.
Because the daily chart is probably in a bear trend, there is an increased risk of a bear trend day. However, because of the wedge bull flag on the daily chart, the odds are that the Emini will try to rally for a few days before trying to break below Friday’s low to begin a measured move down to the May low..
Pre-Open market analysis
The Emini reversed down strongly again on Thursday. Friday had a 1 tick bull body. It therefore was bad follow-through for the bears. Furthermore, it is a buy signal bar for a High 2 bull flag pullback from the all-time high. Yet, because it was a doji, the Emini will probably go sideways for a day or two. The bulls need a strong reversal up this week to convince traders that the selloff has ended.
At the moment, the odds are that the Emini has begun a 150 point correction that could last 2 – 3 months. While the bulls want a reversal up from the June low and 2400, it is more likely that the bears will sell rallies. Hence, the Emini is probably in a bear trend on the daily chart.
Friday had a strong rally. Even though it failed, it was strong enough to make a test back up to Friday’s high likely today or tomorrow. Also, the market is seasonally bullish from August 30 to September 5.
Bear channel more likely than strong bear reversal
While Friday’s 1 tick bull body prevented the bears from getting a bear body on Friday, the odds still favor the bears over the next 2 months. Yet, the lack of strong follow-through selling makes a weak bear trend likely. Consequently, the bears will probably get a bear channel down to the March or May low rather than a breakout and quick collapse.
When there is a bear channel, there are often strong bull trend days. As a result, the day trading bulls will be willing to swing trade when the setups are good. The bears will be more inclined to sell rallies on the 60 minute and daily chart and take profits at prior lows.
Overnight Emini Globex trading
The Emini is down 2 points in the Globex market. Since Friday was a doji bar on the daily chart, it was a trading range day. That increases the odds of more trading range trading today. Furthermore, since a bear channel for the next 2 months is likely, bears will be less willing to sell near prior lows. This reduces the chances of a big bear day today.
However, if the Emini daily chart is now in a bear trend, big surprises will probably come on the downside, like the past 2 Thursdays. As a result, if a day begins to form a strong bear trend, it could fall very far. Therefore, swing traders should not exit bear trends too soon.
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
After a small buy climax, the daily EURUSD Forex market pulled back to the moving average. The bulls have a bull flag and Friday is a good buy signal bar. The odds favor at
least a 70 pip rally to the August 11 lower high.
While there was a parabolic wedge buy climax at resistance 3 weeks ago, the break above the tight bull channel was small. This is not very extreme behavior. Furthermore, once the bulls see that the bears cannot get a reversal within 10 bars, the bulls buy again. In addition, the bulls have a good buy signal bar on Friday, and the bull flag is holding above the moving average.
Consequently, the odds favor a resumption of the bull trend. Since the chart is in a tight range, the initial target is the top of the range. Therefore, the EURUSD will probably rally 70 pips to the August 11 lower high this week. Once there, the bears will try to create a double top. If they get a good sell signal bar, they would have at least a 40% chance of a reversal down to the July 26 low. Hence, that would be a 300 pip pullback.
Bull trend resumption?
Alternative, if the bulls can get 20 or more pips above the August 11 high, the rally will probably continue up to the August 11 top of the bull trend. However, a trading range late in a bull trend is usually the final bull flag. Furthermore, the chart is at resistance on the monthly chart. Therefore the odds favor a bigger pullback if the bulls get their new high. The 1st target is the July 26 low. The next target is the bottom of the tight channel at the July 5 low.
Overnight EURUSD Forex trading
The bull’s broke above Friday’s high in the past few minutes. This triggered the buy signal on the daily chart. When a buy signal triggers on a higher time frame chart, there is often a pullback. Consequently, this initial breakout might fail. Yet, unless the day becomes a strong reversal day, the odds favor at least a 70 pip rally to the August 11 high this week. As a result, bulls are swing trading, betting on that test.
While that 3 hour rally is only 45 pips, the odds still favor the bulls today. Therefore day traders looking to short will only scalp unless there is a strong reversal down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had another trading range day today. The bulls got a higher low major trend reversal, and want a 2 – 3 day rally.
The Emini formed another trading range day. Yet, it closed above its open and created an acceptable buy signal bar on the daily chart for tomorrow. But, the odds are that the Emini has begun a correction down to the 2350 area. Therefore, it is more likely that traders will sell rallies.
Today’s bull reversal is probably not big enough to reverse last week’s selloff. Therefore, the odds favor a 2 – 3 day bounce this week.
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.
