S&P 500 testing 2200—big, round number
Pre-open market analysis
The Emini is in a bull trend on all higher time frames. There are magnets above around 2200 and up to 2220. Hence, the Emini will probably go higher. Yet, the rally is very late on all time frames, and there are also potential Final Bull Flags. This increases the chances that the current rally will fail to get above resistance. Furthermore, it increases the chances of a reversal.
If the Emini reverses, it will probably fall 2 – 5%, which is 40 – 100 points. Because the trend is in a tight channel on the weekly chart and there are 7 consecutive bull trend bars, the odds are that any reversal will be minor. Therefore, bulls will buy the selloff, correctly expecting at least a test back up.
The Emini had a brief rally yesterday and then entered a tight trading range. The bulls are hoping for trend resumption up today and the bears want a trend reversal down. Yet, with so much tight trading range trading for a month, the odds are that today will be mostly a trading range day.
Emini Globex session
The Emini traded in a narrow range overnight. Traders often say, “Never short a dull market.” They know that a quiet rally on the daily chart like this might suddenly break to the upside and suddenly become a strong bull trend.
With targets from 2200 to 2220, there is at least a 40% chance of a strong bull breakout. Yet, if it happens, there is a 60% chance that it would be an exhaustive buy climax. Hence, they would see the rally as a vacuum test of resistance. Traders would then be prepared to sell a strong reversal down.