The Emini will probably be in a trading range for at least a couple of weeks after a buy climax at the bottom of the 15 month range. At a minimum, the odds favor TBTL Ten Bars, Two Legs sideways to up. Less likely, the reversal will test the all-time high, or continue down relentlessly without pausing for more than a few days.
This is the final week of the month. The midpoint of the month’s range is important. At a minimum, the bulls want a close above the midpoint and the bears want a close below the midpoint as a demonstration of strength. The day opens in about 30 minutes, and the Emini is around the midpoint of the month’s range and at the monthly moving average. The monthly chart is still in a bull flag above the moving average. The weekly chart on Friday closed near its high, but the candlestick pattern was a doji and not a strong reversal up from the bottom of the range. Also, it followed 2 big bear bars. The odds are that there will be sellers above last week’s high and the first attempt up will be limited to a bar or two (a week or two).
The daily chart has had 3 days up from support, but none was a big bull bar closing on its high, and the bear channel down was tight. This means that the reversal up is more likely minor, which means that it is probably a leg in what will become a trading range. Whether or not the Emini trades above last week’s high, possibly to the top of the micro wedge around 1940 and the moving average, it is likely that the rally will be followed by a test back down. The bears want the trading range to be a bear flag. The bulls want it to be a 15-month triangle and therefore a bull flag. The daily chart is still Always I Short and the bulls will probably need a major trend reversal if they are to test the all-time high. Even though the location at support is good for the bulls, as is the sell climax, the context is also good for the bears, as is the momentum down. Since the bulls have not yet done enough, the probability still favors a test back down, which might be the start of a breakout below the October 2014 low and the bottom of the 15-month trading range.
With 30 minutes to go before the open, the Emini is down 9 points. The 60-minute chart is slightly overbought and it is beginning to test the lower highs in the January selloff. It could test down any day. The bears will see a double top bear flag and the bulls will look for a major trend reversal up. Whether or not the Emini tests down for a day or two to the 1840 bottom of the 1st pullback this week, the odds still favor a test up to near the top of the 60-minute wedge bottom at around 1940 at some point within the next 2 weeks.