Pre-Open Market Analysis
After last week’s new all-time high, the Emini has pulled back. Yet, the reversal down so far is weak. It therefore is more likely a bull flag than a new bear trend. Because the Fed’s FOMC interest-rate hike announcement is on December 14, and the November rally was a buy climax, the Emini might remain in a narrow range until the report.
Because this pullback is a bull flag, the bulls can get a bull breakout at any time. While a reversal down is possible, it is not likely without more selling pressure. The bears would need either many more days in the trading range and then a major trend reversal top. Less likely, they could create a series of strong bear bars. Traders would therefore see those bars as a sign that then bulls were giving up.
Most likely, the Emini will be sideways, confused, and balanced going into the Fed meeting. This means that most days will continue to have a lot of trading range trading, and strong trend days will probably be rare.
Overnight Emini Globex Trading
The Emini again tested below the August high last night. That is the breakout point for the 3-week rally. In addition, it reversed up strongly. Therefore, last week’s double bottom from just above the breakout point might remain open on the daily chart. The bulls might get a new high first. Yet, the odds are that the gap will close within a few weeks. This is because gaps rarely stay open for long when they form late in a trend.
Because the overnight reversal was strong and there is a double bottom on the day session chart, the odds of a trend day are higher today. While the bears want the 8-day tight trading range to continue at least until next week’s Fed interest rate announcement, the bulls want trend resumption up after their 12-day bull micro channel. Since trading ranges have inertia, the odds are that the trading range will continue into the FOMC meeting. Yet, there is room to the top of the range and the momentum up is strong. The odds favor higher prices over the next few days.