With about 90 minutes to go before the NYSE opens, the Emini is down about 10 points. The bulls created a higher low major trend reversal (and a head and shoulders bottom, and a failed double top bear flag) on the 60 minute chart. A bottom in a strong bear trend has about a 40% chance of leading to a swing up for a measured move, and a 60% chance of either a trading range or a failed bull breakout and then a reversal down. If there is a failed bull breakout and reversal down, it would come from a type of wedge bear flag since it would have 3 pushes up. The first two pushes are the neckline of the head and shoulders bottom (the Jan 19 high after the left shoulder, and yesterday’s high, which followed the head).
Since the Emini was so extremely oversold and it reversed up from major support, and there are reasonable targets above (the top of the wedge bear channel and the daily moving average are both above 1940), the context here is strong enough so that the bulls have better than a 40% chance of a swing up (but not a 50% chance yet).
A head and shoulders bottom always is a a trading range, and a major trend reversal is a double bottom and therefore also a trading range. Trading ranges resist break outs. This means that the most likely of the 3 outcomes is for the trading range to grow (instead of having a successful bull or bear breakout).
Since the dominant feature on any higher time frame chart is the sell climax down to support on the daily chart, it has the most influence over the next several days. A wedge bottom in a sell climax usually has TBTL as its minimum reasonable goal. The bounce so far has been 5 days.
This is also the last few trading days of the month. I said last week that another reason for a rally into the end of January was that January was down about 10% at that point. That is extremely unusual, and with 2 weeks left, there was more than enough time for the month to end up as a more typical month (meaning it would be down significantly less than 10%).
Although it is possible that the 1st of the 2 or more sideways to up legs ended on Friday, it is more likely that the Emini is still in its 1st leg up. Since it is coming from a tight bear channel, the reversal up is more likely minor, which means that the odds favor a test down within the next couple of weeks. A minor reversal means that it is much more likely to end up as a bull leg in a trading range than the start of a bull trend (a major reversal). There is no clear top yet and good targets above. This means that the odds favor at least a little more up, and possibly a rally to the targets above, before the Emini tests last weeks low. If it tests last weeks low, the test could then form a major trend reversal up. The odds of a swing up on the daily chart at that point would be about 40%, just like they are now with the 60 minute major trend reversal that began with Monday’s low.