Trump’s Mideast trip will not prevent 100 point correction
I will update around 6:55 a.m.
Pre-Open market analysis
The Emini will probably form an inside bar on the weekly chart this week. It therefore will probably have a lot of trading range trading, and most days will probably be mostly trading range days. Furthermore, since it is now near the top of last week, it will probably begin to trade down for a couple of days starting today or tomorrow.
Yesterday was a breakout mode day and had a bull breakout. Yet, it spent the next 2 hours in a tight range. The bulls want a new all-time. Since this week will probably be an inside week and last week was the all-time high, the odds are against a new all-time high this week.
Furthermore, last week was a big bear doji on the weekly chart. It is therefore a weak buy signal bar. Hence, if this week trades above last week’s high, the breakout will probably be small.
Because this is what is likely, traders always have to be prepared for a Black Swan. That means a low probability event. The most likely Black Swan would be a strong bull trend that breaks far above last week’s high.
Weekly buy climax
Since the Emini has now been above its weekly moving average for 28 weeks, and that has not happened during this 8 year bull trend, this extreme buying will likely end soon. Hence, there is still a 60% chance of a 100 point selloff before a 100 point rally. The odds are that a breakout to a new high will probably not go far unless there is 1st a pullback to the weekly moving average.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. Since the odds are that this week will fail in its test of last week’s high, the Emini will probably begin to trade down today or tomorrow. The test will probably not go above last week’s high, but it might go a little above. The odds are against a strong bull breakout above the 3 month trading range. This is especially true since last week was a big bear doji bar, and therefore a weak buy signal bar.
Since this week will probably be an inside week and it is now near last week’s high, it will probably begin to trade down for a couple days. The selloff should begin today or tomorrow. Since it is far above last week’s low, any selloff will probably be minor. For example, it might test last week’s close around 2380.