Pre-Open Market Analysis
The Emini was in a bull channel yesterday. Yet, the range was only 4 points for most of the day. It therefore was mostly trading range price action. It traded between the 60-minute moving average above and the 2152 bottom of the 3-week trading range below.
This lack of movement is because the Emini is still deciding whether yesterday’s bear breakout will be successful. The bulls see a bull flag and want a rally to a new high. The bears want a 40 – 100 point correction. While both will probably achieve their goals over the next month or two, the market has not decided which will come first.
Friday’s Unemployment Report
The Emini might be waiting for Friday’s unemployment report. Many traders expect it to be a catalyst for a breakout up or down. While Tuesday’s breakout closed back in the 3-week range and yesterday was bad follow-through for the bears, the context favors the bears. The breakout was big, the Emini is overbought on the weekly chart, the breakout point at the top of the 2-year range probably needs a test, and August often has corrections.
Because yesterday was a bull inside bar after Tuesday’s bear breakout, it is a buy signal bar for today. Bulls see it as a sign that the bear trading range breakout failed. It is similar to the June 28 bull bar on the daily chart after the prior day’s strong bear breakout.
Yet, with Friday being an important catalyst, most traders will be hesitant to buy on a stop above yesterday’s high. Furthermore, they will be reluctant to sell on a stop below its low. It is a bull bar after a breakout bar that had a big tail. The odds are that there are buyers below. In conclusion, today will probably not be a strong trend day up or down.
Globex Emini Session
The Emini rallied overnight and completed a clear 3rd leg up on the Globex chart. It then sold off over the past hour. Three-push patterns often have one more push before having a couple of legs sideways to down. However, the odds are that the Emini will not rally much more before evolving into a trading range today.
While the day session also has 3 pushes up, that rally is in a tight bull channel. It is therefore unlikely to reverse into a bear trend without 1st going sideways for several hours. Because the channel is tight, the bulls see it as a resumption of the July rally.
Yet, it stalled yesterday at the 60-minute moving average and a 50% pullback. Furthermore, it is still below the top of Tuesday’s sell climax and mostly below the 3-week trading range. The bears know that they have at least a 50% chance of a 2nd leg down. Furthermore, because of the context on the daily and weekly charts, the pullback might be as much as 100 points.