es-33The Emini rallied strongly for the 1st hour, and then entered a trading range, which is a breakout mode setup for either trend resumption up or trend reversal down. The bulls got trend resumption up to the Leg 1 = Leg 2 measured move target. The next magnet is the May 10 high of 2079.75. That was a major lower high that led to a reversal down below the April low.

The bears see today’s trading range as a potential top. They don’t mind early trend resumption up tomorrow as long as it fails within the 1st hour. They would then look at today’s 4 hour trading range as the final bull flag. Because today was a buy climax, there is a 75% chance of at least 2 hours of sideways to down trading tomorrow that begins by the end of the 2nd hour. Although it could lead to a bear trend day, a trading range day is more likely, especially since today spent 5 hours in a trading range.

Today’s rally was strong enough so that the odds favor a test of the May 10 high this week. As I wrote several days ago, May might even get above the April high and form an outside up month. If there is strong follow-through buying, traders will begin to see this as a possibility, and it could lead to a quick move to above last month’s high.

See the weekly update for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.

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