Pre-Open market analysis
Yesterday was the 3rd sideways day after last week’s reversal down. The bulls want the bull trend to resume up from a higher low. A gap up today would create a 3 day island bottom. That would probably mark the end of the pullback.
However, the bears triggered a weekly sell signal yesterday. Furthermore, the daily chart is overbought. In addition, the bears have a double top with the January high. But, the bull channel over since early July is tight and the weekly sell signal bar is weak. While the odds favor another 2 – 3 weeks of pulling back, they also favor a new all-time high within a couple of months. There is still a 30% chance of a 20% correction before a big breakout above the old high.
The Emini is deciding how big this pullback will be. At a minimum, the bears want a test of the August 2 buy climax low. Even if they get that, the odds still favor at least one more attempt at a new all-time high.
ioi Breakout Mode
Since yesterday was an inside day after an outside day, it formed an ioi pattern. Because yesterday was an outside bar, the day before was inside of yesterday. Hence, this is inside-outside-inside, or ioi. This is a breakout mode setup.
Because yesterday was a bull bar and the pattern is in a bull trend, it is an ioi bull flag. But, the location in the middle of the August range is bad for breakout traders. The odds favor lower prices. However, a gap up above the ioi this week would probably end the pullback. This is unlikely, but it would make a new high likely within a few weeks.
Overnight Emini Globex trading
The Emini is down 15 points in the Globex market. It will therefore gap down on the 5 minute chart. If it trades below yesterday’s low, it would trigger another sell signal on the daily chart, based on the ioi.
A big gap down increases the chance of a trend day up or down. The bulls hope for a micro double bottom with Monday’s low on the daily chart. A bear trend day would be more likely. The next target for the bears is the August 2nd low, which is the bottom of the most recent buy climax on the daily chart.
When there is a big gap down, there is only a 20% chance of a strong trend from the open. Eighty percent of the time, the Emini enters a trading range for about an hour until it gets closer to the EMA. At that point, the bulls look for a double bottom or wedge bottom and the bears want a double top or wedge bear flag. Then, a swing is likely for at least a couple of hours.
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. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not in a position at the moment, these entries would be logical times for him to enter.