Pre-Open Market Analysis
S&P 500 Emini: Day traders see a weak bull flag candlestick pattern
Friday was a High-1 buy signal bar. It will trigger if today trades above Friday’s high. The rally of the past month has allowed bears to consistently make money by selling above prior highs. This happens in a bull trend when the trend is beginning to transition into a trading range. The bottom of the range is also around the December 31, which is another magnet. As long as the Emini is above that price, it is up on the year.
The Emini made an all-time high last week after a 9-month pullback. Instead of breaking out strongly, it immediately reversed. This is more common when a breakout will not be successful. While it is possible that the bulls will get their measured move up, based on the 300 point height of that 2-year trading range, it is more likely that they will not. Whether or not they do, there is a 60% chance of at least one 20% correction coming at some point this year. Tops and reversals are rarely clear in trading ranges until the reversal has gone a long way. Most traders end of trading, taking quick profits and then looking for the next trade in either direction.
The 3-day selloff on the 60-minute chart has been in a tight channel. Tight channels are usually followed by trading ranges and not bull trends. The odds are that any rally today will probably be limited, even though the 3-day selloff is a 2 day bull flag on the daily chart. It is more likely that the 1st rally attempt will be sold and that the 60-minute bears will get at least a 2nd leg sideways to down before the bulls will be able to test last week’s high.
A 60-minute trading range means that swings up or down on the daily chart will probably not last all day. This means that there will be at least 2 swings today and that today will be a trading range day. Traders never know in advance if the 1st swing will be up or down. The result is usually a trading range open.
The weekly chart is in a buy climax. There is a 90% chance that this week will trade below last week’s low, or next week will trade below this week’s low.
The monthly chart closes on Friday. While the month so far is a bull trend bar, it is small and at the top of the 2-year trading range. The low of the month is 2026, which it the April 7 low, and the bottom of the potential Final Bull Flag on the daily chart. The Emini might get drawn to that price by the end of the week.