Pre-Open Market Analysis
The weekly Emini chart has 2 consecutive exceptionally big bull trend bars closing near their highs. This is extreme buying. However, when a pair of consecutive extremely strong bull bars form late in a trend, they usually attract sellers. The strong bulls see it as a surprisingly great opportunity to take profits. They will typically wait for at test of the bottom of the buy climax and the 20-week EMA before buying again. The strong bears know this and they begin to sell, looking for that test down over the next few weeks.
When there are consecutive big bull bars in a buy climax, there is only rarely a 3rd consecutive big bull bar. Consequently, the odds are against a big bull week. More likely, this week will be either a transition week on the weekly chart, or a reversal week. A transition week is a small bull bar or a doji bar, and both would probably lead to a reversal down next week. Friday’s vote on a government shutdown is an obvious potential catalyst.
Pullback Beginning This Week?
The odds are that the weekly chart will put it a short-term top this week. The target for the reversal is the bottom of the final buy climax. Since that is near the magnet of the 2687.00 open of the year, the Emini should test there over the next few weeks.
Because the weekly and monthly rallies are so extremely strong, the odds are that a test of the open of the year will lead to a rally back up to the January high. Consequently, traders will buy the 5% pullback.
Overnight Emini Globex Trading
The Emini is up above 7 points in the Globex session and it might gap above Friday’s high and the 2800 Big Round Number. The dominant force this week is the pair of big bull bars on the weekly chart. The odds are against a 3rd consecutive big bull trend bar on the weekly chart. In addition, the odds are that the Emini will begin to test down to the open of the year. Consequently, day traders should be ready for one or more bear trend days this week.
Yesterday’s Setups
I was away on Friday and therefore will not post its chart today.