Emini Bull Flag After Early October Buy Climax
Pre-Open Analysis
Friday was an inside day in a bull trend and therefore a 1-day bull flag. By yesterday trading above Friday’s high, the buy signal triggered. Yet, the Emini sold off on the open. After a tight range, the bear trend resumed and yesterday traded below Friday’s low. This is an inside day. The bulls bought the selloff, which reduces the changes for much follow-through selling today. In addition, an outside day often leads to an inside day. This would then create an ioi (inside day – outside day – inside day) bull flag. It also is a sell signal for a micro double top.
Most likely, it is the start of a tight trading range. The odds favor at least a small 2nd leg up after the 2-week breakout, but that leg up will probably become part of a taller tight trading range. The range will probably last at least a couple of weeks. The bears would then try again for a reversal down.
Buy Climaxes, Resistance Above
The 2-week rally was extreme, and Thursday rally was exceptionally extreme. When there is a buy climax, the Emini often pulls back for a few days. Yet, the rally was strong enough to make a 2nd leg up likely. However, there are measured move targets at 2559.50 and 2579.25.
In addition, the weekly and monthly charts are late in buy climaxes. Therefore the upside from here is probably small. The odds favor a 100 – 200 point pullback within the next few months, possibly during the upcoming earnings season. However, the next week or two will probably be sideways to up.
Overnight Emini Globex Trading
The Emini is up 5 points in the Globex market. However, since yesterday was an outside day, there is an increased chance that today will be an inside day. In addition, even if today goes above yesterday’s high, it would be at the top of a 3-day tight range. This reduces the odds of a strong rally, despite the 20 gap bar buy setup on the 60-minute chart.
Since the 2-week rally has been so strong and there are measured move targets above, the odds favor higher prices. The bulls will therefore try for a strong bull trend day. Traders will watch for an early strong bull breakout. However, a continuation of the 3-day range is more likely. Despite the micro double top on the daily chart, a strong bear trend is unlikely after yesterday’s late reversal up on the 5-minute chart with a strong bull trend on the daily chart.
Yesterday’s Setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.