Emini might begin summer 100 point correction in July
Updated 6:52 a.m.
The Emini gapped up and then sold off for a few bars. The gap up was big enough to create a Big Down, Big Up, Big Confusion pattern with Monday’s selloff. Therefore, the odds favor a trading range open. While the 3 consecutive bear bars make the Emini Always In Short, the lack of big consecutive bars, the open in the middle of yesterday’s range and at the 60 minute moving average make a trading range likely.
The bulls want an Opening Reversal up from around Monday’s low. The bears want a strong break below yesterday’s low. Because of the lack of big consecutive bear bars, the odds favor a bounce and an early trading range. Furthermore, because the selloff is weak, the odds favor mostly a trading range day.
Pre-Open market analysis
The Emini on Friday had a trading range day. Because the monthly chart had a 2 bar breakout above a likely small final bull flag, June is a sell signal bar on the monthly chart. Since the monthly chart is in a tight bull channel and June was not a strong sell signal bar, this is not a strong sell signal.
However, because it is an obvious sell signal, July will probably trade below June’s low to trigger the sell. The market needs to know if there are more buyers or sellers below the sell signal bar. Since this is a likely small final flag reversal, if July trades below June, it will probably lead to a pullback lasting a few bars. That is a few months.
But, the bull trend is strong on the monthly chart. Therefore, the best the bears will probably get over the next few months is a pullback in the bull trend, and not a bear trend.
Overnight Emini Globex trading
The Emini is 4 points in the Globex market. While the bulls still hope for a strong break above the all-time high, the odds are that the bears will continue to sell rallies. They will bet that the Emini has begun a 2 – 3 month reversal back down to the May 18 2342.25 low, whether or not there is a small new high 1st.
The Emini is still in the middle of a month-long trading range. In addition, most days in that range have been trading range days. Furthermore, the 4th of July week is usually the 2nd quietest week of the year (Christmas week is the quietest). Consequently, today will probably be another trading range day. As a result, traders will look for any initial rally or selloff to reverse or enter a trading range within 1 – 3 hours.
The odds are against a strong, sustained trend up or down. Therefore, the bulls see Monday’s selloff as a bear channel and hence a bull flag. The odds favor a bull breakout and then a trading range.
Friday’s setups
Here are several reasonable stop entry setups from Friday.
EURUSD Forex market trading strategies
After breaking above the major November 9 high, the daily EURUSD Forex chart reversed down. Since it has had 3 or more bear bars with at least one closing near its low, the odds are that there will be at least 2 legs sideways to down.
The EURUSD Forex market has been in a trading range for 2 years. Therefore every strong breakout up or down will likely fail. Hence, the current 6 month strong rally above the November 9 major lower high will probably be just another leg in the range. Yet, the momentum up in June was strong enough so that the bulls will probably soon buy this 4 day selloff. This is especially true because it is at the support of the June trading range high and a 50% pullback of that June breakout.
Yet, once a breakout reversed the breakout with 3 or more consecutive bear bars. In addition, at least one was big and closes near its low. Consequently, traders see that as a sign that the bears are strong enough to sell the 1st small rally. That means that there will probably be sellers below last week’s high. Furthermore, it means that the bears will likely get at least one more leg down.
However, because the June rally was strong, the bulls will probably buy a 2 – 3 legged pullback. They therefore correctly see this 4 day reversal as a bull flag and not an early bear trend.
200 pip tall trading range for several weeks
The bears will sell a rally and the bulls will buy a pullback. Hence, this reversal is probably the start of a trading range. It will probably last at least several weeks.
If the reversal down continues relentless below the June low, then the bears will have made the chart neutral. Until then, the probability of at least a test of last week’s high still favors the bulls.
Because the daily chart is now at support, the bulls will begin to buy around here and down to 1.1250. The bears will begin to sell at their breakout point at the June 30 low, which was around 1.1400. They will continue to sell up to the June high around 1.1450. Hence, the EURUSD Forex market will probably be in a 200 pip range for several weeks.
Overnight EURUSD Forex trading
The 5 minute chart has been in a 30 pip range for the past 4 hours. In addition, the 4 day selloff is testing the breakout point at the top of the June trading range. The odds are that the bulls will begin to take control over the next few days and they will get a weak rally back to the 1.1370 area.
While the 4 day selloff has been strong, it is probably a bear leg in a trading range that will last several weeks. Therefore, day traders will begin to buy below prior lows and sell above prior highs, looking for scalps. Traders on the 60 minute chart will look for 50 pip moves up and down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed up from below yesterday’s low. Then 2nd entry buy led to a reversal day.
The Emini reversed up from Friday’s low, but sold off at the end of the day. The bears have been accumulating bear bars on the daily chart. Since this is a sign of selling pressure, it increases the chances that the correction down to below the May 18 low of 2349.25 has begun. The odds are now about 50%.
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.
