Possible bull breakout above Emini bear flag
Updated 6:49 a.m.
Today began with more limit order trading at yesterday’s high, just above the 60 minute moving average. Yesterday was a bull channel and therefore a bear flag. Because the channel lasted more than 20 bars, the probability of a bull breakout is as high as for a bear breakout.
The Emini is deciding between a bull trend day and a continuation of yesterday’s trading range price action. So far, the bulls have not done enough. Since yesterday was a small day, if the bulls fail, the Emini will then try to trade below yesterday’s low and create an outside down day. Unless the bulls get a strong breakout soon, the odds favor a reversal down.
Pre-Open Market Analysis
First of all, on the 60 minute chart, yesterday had some follow-through selling after Friday’s bear breakout. Yet, the selling was weak. Friday’s bear breakout was an entry for an expanding triangle bear flag.
The Emini is still in a 8 day tight trading range (triangle) in a month-long bear flag on the daily chart. Hence, it is in Breakout Mode. While there is a 60% chance of a 2nd leg down from the all-time high, there might first be a brief breakout above the bear flag. Also, there is only a 40% chance of a move much above 2200 without first closing the gap above the July 2015 high.
Overnight Globex trading
The Emini is unchanged after trading range trading overnight. It is still in breakout mode, deciding between a new high and closing the gap above the July 2015 high.
Forex: Best trading strategies
The 240 minute EURUSD Forex chart sold off strongly last night. Yet, it is still above the bottom of the bull trend and therefore it is still a pullback.
Nothing has changed on the daily chart. Hence, the EURUSD is still at the apex of a triangle. There is therefore a 50% chance that the breakout will fail. Furthermore, there is a 50% chance that the successful breakout will be up or down. Finally, the target is about 200 points, which is the height of the month-long triangle (trading range).
Overnight Forex sessions
The EURUSD Forex market sold off strongly overnight to below Friday’s low. Yet, it is still above the bottom of the month-long trading range. Because the selloff was in a micro channel, which is a sign of strong bears, the bears will sell the 1st rally. While the momentum down has slowed over the past 5 hours and the chart 60 minute chart is forming a micro double bottom, the best the bulls will probably get is a rally in a trading range.
As a result of the loss of momentum just above support, the bears will probably take profits and wait to sell rallies. The odds are that today will be mostly sideways in either a trading range or a broad bear channel.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had big swings early on, and then had a bear breakout into a Trending Trading Range Day and Broad Bear Channel. As happens 60% of the time, it rallied back above the bottom of the upper range.
While the Emini broke below the month long bear flag today, the bears need follow-through. Because the Emini has been sideways for a month, it is more likely that the bears will not get what they want. Hence, the odds are that the Emini will remain in its range. While there is a 70% chance that the gap above the July 2015 high will close within the next 2 months, until there is a breakout with follow-through, the odds are that every breakout attempt up and down will reverse.
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.
