Pre-Open market analysis
Yesterday reversed down from above Friday’s high and then up from below Friday’s low. It was therefore an outside down day. Furthermore, it again tested the July 18 low, which was the neckline of a double top on the daily chart. Also, it was an important magnet on Thursday and Friday.Traders are still deciding if the June/July bull trend is resuming. Unless there is a breakout to a new all-time high, there is a 50% chance that this rally will form a lower high. The target for the bears is the bottom of the August trading range and down to the June low around 2700.I mentioned last week that there is an increased chance of an island top this week because of the uncertainty surrounding the breakout. Any gap down this week would create an island top with Thursday’s gap up. Most island tops and bottoms are minor reversal patterns. But the context in this case increases the chance of a possible swing down.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex session. It therefore might gap below yesterday’s low. If it does, there will be a 3 day island top on the daily chart.However, if the gap is small, it will probably close in the 1st hour. But, if there is a gap down and an early strong selloff, today could be the start of a swing down for several weeks.More likely, the 3 week rally will 1st test 3,000 before the bulls will give up. After 3 trading range days, traders will expect another trading range day today. They will switch to swing trading if there is another strong breakout up or down, like they did for 40 minutes yesterday.Since the bulls have been in control for 3 weeks, they will try to continue the rally to above 3,000. They would like today to be a buy signal bar for tomorrow. They will try to get today to close near its high. For example, if today is a bull inside day closing near its high, today will be a bull ioi buy signal bar on the daily chart for tomorrow.
Emini Outside Down After Gap Up So Possible Island Top
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