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The Emini gapped above the 60 minute moving average. It also gapped above yesterday’s high, but immediately closed the gap. Yet, the bears were unable to get a quick move down. Furthermore, the bars are not big. Hence, this is therefore a balanced market in search of direction.
This trading range price action increases the chances of another trading range day. Furthermore, it increases the chances of a trading range for the 1st hour or two. The bulls need to hold above the 60 minute moving average. If they are successful, the Emini will then probably test last week’s high today or tomorrow.
The Emini is selling off slightly and is Always In Short. Yet, the bears need to break strongly below the 60 minute moving average. If so today could be a bear trend day. However, these early small bars and reversals within a 3 week range make a strong trend day up or down less likely. The odds therefore favor another trading range day.
Pre-Open market analysis
The Emini continued its 3 day pullback from the FOMC buy climax. While the bears hope that this is a reversal down from a lower high major trend reversal, the pattern is too small on the daily chart. The rally to last week’s high only had 4 bars. In addition, it was part of a 3 week tight trading range. Therefore, this selloff is more likely a continuation of that range than the start of a bear trend. Hence, the odds are that bulls will soon buy now that the pullback is getting low in the range.
Since the high on the weekly chart was unusually far above the weekly moving average, any rally will probably stall. Many bulls want a pullback to the weekly moving average before they will buy again.
Because this year’s rally has been strong, the odds are that the 1st reversal down will attract buyers. Therefore, the bears will probably need a test up and a double top before they can begin the selloff to the December close.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex market after yesterday’s bull reversal. Yet, it has been in a 3 point tight range over the past 6 hours.
Because the Emini has been in a trading range for several weeks, the odds favor reversals every few days. Since it has sold off for 3 days, the bulls should probably get a bounce today or tomorrow. They need a breakout above the 60 minute moving average to begin a leg up.
In addition, there are not enough bars for a major top. Hence, the bulls probably will have to test last week’s high or the all-time high before the bears can get a reversal down to the December close.
EURUSD Forex market trading strategies
The bears have a wedge rally on the daily chart. Furthermore, it is now testing the top of the 5 month trading range. This is therefore the sell zone. Yet, there is no reversal down yet. In addition, there is a gap up after the 2nd leg up. Hence, that gap might lead to a measured move up. Hence, it could lead to a strong breakout above the neck lines of the bottom. It could therefore then lead to a test of the November top of the huge bear reversal down.
Because the chart is still in a trading range, the odds still favor a continued trading range rather than a successful breakout. Yet, trading ranges often have small breakouts that fail before the next leg down begins. This is therefore an important area. It could lead to a 400 pip measured move up or a 300 pip sell off to test the March low. The bulls need a strong breakout to convince traders that the rally will continue up to the November 9 high.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart is near its high, but has been in a 20 pip range for 4 hours. Since it is near the top of a 5 month trading range, the bulls need a strong breakout. Without it, the odds favor a swing down to test the higher lows of the past 3 weeks.
Since the momentum up in March has been strong and the bull channel has been tight, the bears probably will need a week or more of sideways trading before they can reverse the market down. Hence, the odds are for a trading range over the next week. Then traders will look for the big bull breakout or reversal down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The selloff today broke below the 2351.00 neck line of the double top on the daily chart. In addition, there is a 60% chance of a selloff to below the December close within 2 months. Hence, tomorrow is important.
Since consecutive big bear bars would increase the chances that the sell has begun, tomorrow’s close is important. The bears want a gap down and a big bear bar, but the bulls want a bull bar. Yet, even if the bulls win, today was so dramatic that the odds are that there will be at least some follow-through selling over the next couple of weeks, even if there is a strong rally 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.