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Emini Traders Eye Government Shutdown

By Al BrooksStock MarketsDec 21, 2017 10:35AM ET

www.investing.com/analysis/emini-traders-eye-government-shutdown-200275060

By Al Brooks | Dec 21, 2017 10:35AM ET

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Pre-Open Market Analysis

The Emini sold off yesterday in a trend from the open bear trend. In addition, it traded below Friday’s high. It therefore closed the gap on the daily and weekly charts, which was likely. The gap is now an exhaustion gap. However, that is minor. Until there is a strong reversal down, the odds favor that every reversal will just be another bull flag.

Congress is working on a continuing budget resolution. If they fail to pass one in the next week, the government will run out of money and shut down. That would result in a selloff that would last at least a few weeks.

The buy climaxes on the daily, weekly, and monthly charts have never been this extreme. Therefore, the odds of much higher prices without at least a 5% correction first are small.

All bull trends are constantly trying to reverse. However, my 80% rule says that 80% of reasonable reversals attempts will fail. That means that betting that the current top will be the one that finally begins a 5% correction is a low probability bet. Traders will not believe that the correction is underway until there are at least 2 strong bear bars on the daily chart. But, at that point, the correction will already be half over.

Overnight Emini Globex

The Emini is up 6 points in the Globex market. Traders still see the 3 day selloff as a bull flag after Friday and Monday’s rally. The bulls tried for a bull breakout yesterday and failed. If the Emini opens here, it would be breaking above the 3-day bear channel again.

However, the bulls need a strong rally before traders believe that last week’s bull trend is resuming. Without that, traders will conclude that the sideways to down pullback is continuing. The Emini is probably waiting for the government shutdown vote that will take place before the end of the month.

The bears need a strong breakout below the 3-day bull flag before traders will conclude that Friday-Monday rally has failed. Even then, the odds continue to favor only minor reversals down on the daily chart until there are at least 2 consecutive big bear trend days.

Yesterday’s Setups

Emini S&P 500

Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.

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Emini Traders Eye Government Shutdown

Overnight Emini Globex

Yesterday’s Setups

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