Emini pausing for Trump at Davos and for Mueller testimony
Updated 6:47 a.m.
Today triggered the buy signal on the daily chart by going above yesterday’s high. Yet, the breakout immediately pulled back. After 3 sideways days, the odds favor more sideways trading today, and the Emini is at the top of the 4 day range. In addition, the buy signal bar is weak. Therefore, there is an increased chance of an early high of the day, like yesterday.
Because the higher time frames are in a blow off top, there is an increased chance of a strong bull trend day. At the moment, that is not likely. The bulls want a trend from the open, but the hesitation increases the chances of a sideways to down move before they can get a bull trend.
The bears want a failed breakout above yesterday’s high and an early high of the day. That would be a double top with yesterday and a lower high major trend reversal. They need consecutive big bear bars before traders will think that they are in control.
The Emini has a 4 bar tight trading range at yesterday’s high. It is deciding on the direction of the initial swing. This hesitation and the 4 day trading range increase the chance of another mostly trading range day. Since the buy setup is weak, there is an increased chance that any early rally will reverse later in the day.
Pre-Open market analysis
Yesterday had an early selloff, but then rallied in a weak bull channel. It was another trading range day after Wednesday’s outside down day. Yesterday was a bear inside day after an outside day. It is therefore a bear ioi (inside-outside-inside) breakout mode setup. Since the bull channel on the daily chart is tight, it is a minor sell signal. This means that a bear breakout is more likely to lead to a bull flag or a trading range than a bear trend. The market might be waiting for the next catalyst, which is Trump’s testimony with Mueller, or his refusal to testify.
The ioi is also a buy signal. Since the daily chart is in a strong bull trend, the odds favor a bull breakout today or Monday. Yet, consecutive bear bars create a weak buy setup. Consequently, the bull breakout might only last a day or two before it reverses back down into the 3 day range.
Since today is Friday, weekly support and resistance can be magnets, especially in the final hour. The bulls want the week to close on its high. The bears want the week to close at or below its open. Since that is more than 30 points below, it is unlikely. Alternatively, the bears want the close to be below the midpoint of the week. This would be a sign of selling pressure. Consequently, it would increase the chances of halting the buy climax over the next few weeks.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex market. It is therefore likely to break above the ioi pattern on the daily chart. That pattern is also a bull flag on the 60 minute chart. Since it is a tight trading range late in a bull trend, there is an increased chance of it being a Final Bull Flag. In addition, since yesterday was a bear bar on the daily chart, there is an increased chance of sellers above yesterday’s high and a continuation of the 3 day range.
Despite the climaxes on the daily, weekly, and monthly charts, the odds favor higher prices. Yet, the increase in the VIX increases the chances of a violent, brief pullback in coming weeks. This could be 2 – 3 days where the Emini falls 100 points. Since the bull trend is strong, as scary as the selloff might appear, the bulls will buy it. Then, a new all-time high would likely come within a week after the selloff.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD daily Forex chart in parabolic wedge at 1.2500 Big Round Number
The EURUSD daily Forex chart has rallied strongly for 3 months. It is now testing the 1.2500 Big Round Number. Furthermore, the rally is in a parabolic wedge and now has a 2 day micro double top.
The EURUSD daily Forex chart is in a strong bull trend, but it is now at the resistance of the 1.2500 Big Round Number. In addition, the rally is in a tight bull channel and it has had 3 surges since December. This is therefore a parabolic wedge. If it begins to turn down next week, the wedge could become a top.
The daily chart had 2 legs up in November in a trading range. That complex top failed. The parabolic wedge rally has 3 legs and is therefore complex as well. When consecutive complex tops begin to reverse, there is a higher probability of a trend reversal and not just a pullback.
Yet, when the bull channel is tight, the market usually has to transition into a trading range for 10 – 20 bars before it can convert into a bear trend. Consequently, even if there is a strong selloff next week, the odds are that the bulls will buy it. The bears will probably need at least a double top before they can take control. In addition, most trend reversal attempts fail. Until the bears get at least 2 consecutive big bear trend bars, the bulls will remain in control.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart reversed down strongly from the 1.2500 Big Round Number both yesterday and again today. This has created a trading range on the 5 minute chart, which is likely to continue today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a weak rally for 2 hours, but then entered a small pullback bull trend day.
Today was a very strong bull trend day. The daily, weekly, and monthly charts are in blow-off rallies. However, the bulls will buy the 1st reversal. The climaxes are so extreme that the odds of a very sharp, brief selloff are high. In addition, the VIX did not fall, despite today’s rally. That means traders are expecting a brief selloff. For example, the Emini might drop 100 points over 3 days. However, the bulls are so eager for a pullback that they will buy it. The result will be a new high within a couple of weeks.
Since today was climactic, there is a 75% chance of at lest a couple hours or trading range trading on Monday, beginning by the end of the 2nd hour.
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.
