Pre-Open Market Analysis
The monthly Emini chart is in an 11 bar bull micro channel. While a sign of strong bulls, it is also a buy climax. Hence, a pullback is likely soon. In addition, it is at the resistance of a measured move up from the 2014 – 2015 trading range. Furthermore, it is at the 2500 Big Round Number.
When a trend is as strong as this, the downside risk is probably a 1 – 3 bar pullback. While that could be 150 points and a trend on the daily chart, the odds are that the bulls will buy the 1st pullback. This is because they have been so eager to buy that they have bought above the low of the past month for 11 bars. They will probably be eager to have an opportunity to buy below a prior month’s low.
Weekly Buy Climax
The pullback of 2 weeks ago got to within 1/2 point of touching the weekly moving average. Since it did not touch the average, this is now 43 weeks above the average price. This is an extreme buy climax. Yet, there is no clear top. Furthermore, the bull channel is tight. Consequently, the best the bears will probably get on the weekly chart is a trading range.
It could easily last several months and test the March low. However, when a bull channel is as tight as this one, the odds are that the best the bears can get is a bear leg in a trading range. Because the range could last 6 months or more after such an extreme buy climax, the height of the range could be big. A reasonable target is the March bottom of the current tight bull channel.
Daily Chart In Weak Bull Channel
The daily chart has had 2 pushes up from the bottom of the August 21 wedge bull flag. If there is a reversal down from above Tuesday’s high, the bears would have a wedge top. In addition, it would be a lower high major trend reversal. Furthermore, it would be a right shoulder of a head and shoulders top. If it reverses down before going above that high, the bears would have a double top lower high major trend reversal with the August 16 high.
While the Emini daily chart is in a bull trend, it has been mostly sideways for 4 months. Since there is no clear top yet, the odds are that it is in the early stages of transitioning into a bigger trading range. The low will probably be around the March or May lows. Since there is no clear to yet, there might be one more new high before that bear swing begins.
Because of the buy climaxes on the weekly and monthly charts, the odds are that the bears will sell a new high on the daily chart. While they will scalp at least part, they might swing trade some for a test of the March low.
Overnight Emini Globex Trading
The Emini is down 1 point in the Globex market. In addition, yesterday was a doji day. It is therefore a weak buy and sell signal bar. The bulls want a strong break above yesterday’s high and then above the September 1 high. Yet, because the Emini has been sideways for several months, traders will continue to look to sell above prior bars and buy below. Furthermore, most days will probably continue to be mostly trading range days. Consequently, traders expect that trends will fail within a few hours and lead to opposite swings.