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Emini SPX: Post Debate Stock-Market Breakout

Published 09/27/2016, 11:02 AM
Updated 07/09/2023, 06:31 AM

Post Debate Stock-Market Breakout

The Emini gapped down yesterday and it therefore created a 2-day island top on the daily chart. That top is also a lower high major trend reversal. Yesterday was also a bear trend day. Yet, after a 9 day bull micro channel, the odds are that the bears will need at least a micro double top or a big bear breakout to convince traders that this is the start of a swing down. Since the price action lacks high probability for the bulls or bears, the odds favor a trading range.

The Emini has been mostly in a trading range for 2 years, despite the small breakout in July. Gaps and island tops and bottoms are fairly common in trading ranges, and therefore have little predictive value. Yesterday’s island top is no more important than the 3 week island bottom that preceded it. The Emini is still in breakout mode.

Buy Climax On Monthly Chart

Friday is the final day of the month. The Emini already has had 7 consecutive bull trend bars on the monthly chart. Since that is rare, it is climactic. If Friday closes above the September open, September would become the 8th consecutive bull trend bar. That has never happened since the Emini began the 18 years ago.

There have been several time when the Emini had 7 consecutive bull trend bars. Each instance led to about a 100 point correction before the rally continued much higher. The odds therefore are that the Emini will have a 100 point pullback in October or November.

Emini Globex

While the Emini rallied strongly after the debate, it has retraced about 50% of the rally. It has been sideways for several hours at this support level, which is only 2 points above yesterday’s close. Big up, Big Down means Big Confusion. The trading range will probably continue on the open.

Traders are still deciding if the weekly chart will have one more leg up before a correction. Most noteworthy is their decision about the monthly close on Friday, and there are still 4 trading days left before we find out.

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