Pre-Open Market Analysis
Since yesterday traded below Monday’s low, it triggered a sell signal on the daily chart. Furthermore, it closed the gap above Friday’s high. Yet, the Emini is still at the apex of a 4-month trading range. It therefore is still in Breakout Mode. The odds are slightly greater for a drop below the July 2015 high of 2084.50 than for a new all-time high. Especially relevant is that the Emini will probably reach both targets over the next few months. Whichever one it hits first will probably provide a setup for a reversal to the other.
While October 26 to November 5 is a reliably bullish time of the year, the gap below on the monthly chart is a strong magnet. Furthermore, the election results could surprise traders. If Trump were to win, or if the democrats get the House, the surprise could cause a big breakout up or down. As a result, despite the bullish seasonality, the Emini could quickly fall to 2050 over just 2 – 5 days.
Because of the persistent trading range, day traders will bet that every day will be another trading range day until there is a strong breakout.
Overnight Emini Globex
The Emini is down 7 points in the Globex session. Hence, if it opens here, it will gap down and create a 2-day island top. Because gaps and island tops and bottoms are common in trading ranges, they lack predictive value. They are therefore simply legs within the range.
Yesterday was the entry bar for a breakout below an 8-day bear flag at the moving average. Furthermore, it was a small bar. Hence, the bears need one or more big bear trend bars before traders will believe that this is the start of a 2nd leg down from the all-time high.
Since the Emini is still in its 4-month trading range and every move has reversed within a few days, the odds are that this pattern will continue. Yet, the triangle since the August 23 high is now tight. The Emini will probably break out soon.