Pre-Open Market Analysis
While the Emini rallied in a Small Pullback Bull Trend yesterday, the rally was weak. Furthermore, the Emini is at the top of its 10-day tight trading range. In addition, the rally had a wedge shape.
Everyone knows that the Fed will almost certainly raise interest rates next week. That news is therefore already factored into the current price. Although the odds still favor a trading range into the report, the great certainty increases the chances of a bull breakout beforehand.
Yesterday was a bull channel. A bull channel is a bear flag. Therefore there is a 75% chance of a bear breakout. Furthermore, if there is a bull breakout, there is a 75% chance that it will fail within 5 bars. Therefore the odds are that tomorrow will have at least a couple of hours of sideways to down trading. Furthermore, it will probably begin by the end of the 2nd hour.
Overnight Emini Globex
The Emini is down 2 points in the Globex session. The bulls see the 3-day rally as the start of a breakout to a new all-time high. Yet, next week’s Fed interest rate hike is a major catalyst for a big move up or down in all financial markets. As a result, the Emini will probably stay in its 11-day tight trading range.
The bears see the 3-day rally as a wedge and a double top on the 60 minute chart. They therefore expect a couple legs sideways to down today and tomorrow. While the bulls might break to a new all-time high before next week’s FOMC report, the odds are that any rally will be small. Traders will probably wait for the report before they create another big move up or down.