Pre-Open Market Analysis
Yesterday was a trading range day after 2 big bull-trend days. While the odds favor follow-through buying from the big reversal up from the 50 day moving average, the Emini is still likely in a correction.
Because the weekly chart’s high is far above the weekly moving average, the odds are that the Emini will test that average. Hence, the current rally will probably fail to reach a new high. In addition, the month-long selloff has been in a tight bear channel. Hence, the current rally is probably a minor reversal. It therefore will more likely lead to another leg down instead of a new all-time high.
If the bulls continue to create consecutive bull bars, traders will assume that the correction is over and that the bull trend is resuming. The bulls have not done enough yet.
Friday is the last day of the month. The bulls are trying to convert what was a bear reversal bar into a bull bar before the month closes. That means that the open of the month is a magnet. Because it is only 20 points higher, the bulls could get there by tomorrow’s close. Yet, the weekly chart is still likely to correct.
Overnight Emini
The Emini is down 2 points in the Globex market. While yesterday was a pause day after a 2-day buy climax, the odds still favor higher prices over the next several days.
This is because last this week’s rally was strong. In addition, it went above the top of the March 23 final major lower high on the 60-minute chart. Hence, the bear trend has evolved into a trading range or bull trend. Furthermore, the breakout above that high was strong. Therefore, the odds favor at least another leg up after the pause ends.
Yet, the 5% correction down to the December close has probably begun. Therefore, the current rally is more likely a bull leg in a bear channel than a resumption of the bull trend.
While the bears would like the 3-day rally to form a double top bear flag with the March 23 lower high, that is unlikely. This is because the rally went above that high. In addition, the rally was very strong.