Awaiting presidential election stock market correction or rally
Updated 6:52 a.m.
The Emini reversed down strongly from above yesterday’s high and is Always In Short. It is testing the 60 minute moving average. The bulls therefore hope that this selloff will form an Opening Reversal up from support. Hence, they want an early low of the day. While they have a 25% probability, the selling was strong. The bears will therefore likely sell the 1st rally. Hence, the best the bulls will probably get over the 1st hour or 2 is a bounce in a trading range.
The bears want the trend down to lead to a strong bear trend day. Because of all of the reversals over the past 4 months, it is more likely that the Emini will bounce soon. Since the selloff was strong, the bears will sell the 1st rally. Therefore, the Emini will probably form a trading range over the next hour or 2. There is a 50% chance that we have seen the high of the day. Yet, there is only a 50% chance that today will be a big bear trend day.
Pre-Open Market Analysis
Yesterday rallied strongly, yet reversed down strongly from a parabolic wedge top. It then sold off strongly in a series of consecutive sell climaxes. Hence, it formed a parabolic wedge bottom.
But, the big picture is the same. The Emini is at the apex of a 4 month triangle. It is therefore still in Breakout Mode. With the election 2 weeks away, it might wait to see if the democrats take the House before breaking out.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. Hence, it might gap up. Yet, it is still within the 3 week range and at the apex of a 4 month triangle. It is a triangle because the range has lower highs and higher lows. Therefore strong moves up or down will likely rails within a few days. The bears want the rally to fail at a lower high. Hence, they will have a Head and Shoulder top bear flag on the 240 minute chart. The bulls want the rally to break above the October 24 wedge bear flag high. They then will try for a new all-time high.
The probability is that the trading range will continue, and every leg up and down will reverse within a few days. Yet, there will probably be a breakout just before or just after the election. There is a 50% chance the initial breakout will reverse. Furthermore, there is a 50% chance that the successful breakout will be up or down.
Forex: Best trading strategies
The 60 minute EURUSD Forex chart has a weak rally in a trading range. It will probably therefore become a lower high. Hence, there will probably be a selloff within a couple of days that will test the higher lows.
The 60 minute EURUSD Forex market rallied yesterday to the October 20 lower high. That was the 1st pullback after the bear breakout and the start of the bear channel. Hence, the bulls reached their minimum objective. After a rally to the top of the channel, the market usually soon trades down. As a result, the Spike and Channel bear trend evolves into a trading range. That is what is therefore likely over the next few days. Furthermore, it might last until the election results in 2 weeks.
Overnight EURUSD Forex sessions
The bear rally continued on the 60 minute chart overnight. Because the rally lacks consecutive big bull trend bars, it is probably a bull leg in a trading range. Therefore it should lead to a test down to the higher lows within a few days.
Less likely, the 2nd leg up will extend to above yesterday’s high before the bears create a 2 legged selloff. In either case, the result will probably be a trading range. Furthermore, the range might last until the election in 2 weeks.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off strongly from above yesterday’s high. After a weak midday rally, the bear trend resumed in the final hour. The day closed below yesterday’s low and was an outside down reversal day.
Today was an outside down day and it closed below yesterday’s low. This is a sign of strength for the bears. Furthermore, it increases the chances of a gap down tomorrow. Yet, until there is a breakout of the trading range, there is no breakout. Traders look for opposite trades after the market strongly moves up or down. When the Emini is in a tight trading range, as it has been for 4 months, the probability is usually the same for the bulls and bears. However, because of the gap below on the monthly chart and the bear flag below the daily moving average, the probability of a successful bear breakout is slightly higher than for a bull breakout.
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.
