Pre-Open Market Analysis
The Emini has been in a tight trading range on the daily chart for 8 days. Furthermore, it has been within a tight trading range on the weekly chart for 7 weeks. It is therefore in breakout mode. While Friday closed on its high and is therefore a buy signal bar for today, ranges resists breakouts. Hence, 80% of breakout attempts fail.
Because the Emini rallies about 90% of the time in the end of October and the start of November, there is an increased chance of a bull breakout this week. Yet, until there is a breakout, there is no breakout. The breakout could be big and fast. This is especially true if the bears win because the Emini is in a bull trend. Traders will therefore be quick to exit. While a bull breakout could also be fast, it more likely would be in a small pullback bull trend. The bulls want a new all-time high.
In conclusion, the tight trading ranges will probably break out soon. The seasonality and the bull trend favor the bulls. The open gap above the July 2015 high favors the bears. The probability is about 50% for each.
Overnight Globex Trading
The Emini is up 10 points in the Globex session. It will therefore probably gap above Friday’s high, the 8-day trading range, and the daily moving average. This increases the chances that today will be a bull trend day.
If it is a big bull day closing on its high, traders would therefore look at it as a measuring gap. The 1st target would be a measured move up based on the 8-day range. That would also be a test of the September lower highs. If the bulls can get above those highs, they will probably then get a new all-time high. The bulls need more than a bull trend day. They need 2 – 3 consecutive bull trend days to convince traders that the trading range has ended and the bull trend has resumed.
Because most breakout attempts fail, traders should also be prepared for this breakout to reverse back down either today or soon. Look back at the daily chart over the past 4 months. There have been many big bull trend days. Yet, the follow-through has been bad, and the bears soon took control again, keeping the Emini sideways.