Pre-Open Market Analysis
The Dow has repeatedly tried to break above the 20,000 Big Round Number. Yet is has failed. As a result, at some point soon, traders will decide there are not enough buyers at this price. Therefore, the market might begin to probe down instead of up.
Since the momentum up on the weekly chart is strong, the bulls will buy the selloff. Hence, the odds favor a new high. This is true whether or not there is a pullback to below the top of the August trading range first. Furthermore, if there is a new high this week, the odds are that it be limited. The breakout would probably soon reverse down and close the gap above the August trading range. This is what typically happens when a gap forms late in a trend. Hence, the odds are this trend will do the same.
Start Of Correction In The Banks?
Major banks sold off strongly on Friday. Since they led the rally, they might also lead the 100 point Emini pullback to around 2180. The bears want follow-through selling in the financials this week. Therefore, that would probably make it likely that the Emini will correct down 4 – 5% by the end of February.
Since most deep pullbacks begin with a big bear bar, traders will be ready for a big bear trend day this week. Therefore, a strong bear trend bar would likely lead to at least 2 legs down. If there is good follow-through selling after the 1st big bear day, the odds would then favor a pullback to 2180.
Yet a strong bear breakout that leads to a strong bull follow-through bar would again shift the odds in favor of a new high over the next couple of weeks. The odds of a pullback are increasing. Yet, the bears need one or more strong bear trend days before traders believe the bulls have given up.