Emini breakout above October triple top needs follow through
I will update again at the end of the day.
Pre-Open market analysis
Friday broke above the top of the October-November-December triple top. It was therefore a new 6 month high.
However, the daily chart has been in a trading range for 16 months. Most breakouts fail. The next target for the bulls is the all-time high, which is far above.
The 3 month rally has been unusually strong with only a 2 week pullback. That is typically not enough to rest exhausted bulls. Therefore, the breakout will probably pull back more within a couple of weeks.
Many bulls will want several more weeks of sideways to down trading to be certain that there are not enough strong bears to create a lower high major trend reversal on the weekly chart. If there is no strong selloff after a few weeks, the bulls will buy again and try for a new all-time high.
The bulls need follow-through buying
Will the bulls get follow-through buying today? The odds are against a strong bull trend day because the next target, the all-time high, is probably out of reach without more of a pullback. If there is follow-through buying, it will probably be limited to a few days. Also, after Friday’s buy climax, today will probably have at least a couple hours of sideways to down trading.
The bears who gave up on the breakout above the October high will sell again soon. They want to make the breakout fail.
The bar after a breakout is always important. If the bears can create a strong bear bar today, today would be a sell signal bar for tomorrow. Traders will wonder if the breakout will fail and reverse down. There is therefore an increased chance of a bear day today. Most likely, today will be neutral.
Risk of blow-off top
The pain trade is still up. Because a pullback from above the 2825 resistance is likely, traders are beginning to position themselves for one. The bulls will start to take profits and the bears will short.
When that is the case, if the Emini does not turn down, both the bulls and bears will buy. This is because the bulls will be trapped out and the bears will be trapped in. They might do so in a panic. That increases the chances of a surprisingly big bull trend day this week. A Surprise Bar late in a bull trend is more likely to be an exhaustive buy climax than the start of a measured move up.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. While Friday broke above important resistance, the daily chart is still in a yearlong trading range. Traders should expect breakouts to fail, even when the rally has been exceptionally strong.
Consequently, there will likely be another pullback beginning within a couple of weeks. In addition, it will probably be deeper than the one that ended last week. That means that there is a growing chance of bear trend days.
However, the daily chart has rallied strongly for 3 months. Most days therefore have closed above their open and many were strong bull trend days. In a bull trend, bull days are more likely than bear days. Day traders are continuing to buy selloffs.
With the Emini going sideways for 5 hours after breaking above the October high on Friday, the odds are that today will be mostly sideways as well. However, the chart is at a very important price. As a result, there is an increased chance of a big trend day up or down.
Also, even if today is a trading range day, the legs will probably last at least a couple hours, which is long enough for swing trades.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely 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 currently in the market, these entries would be logical times for him to enter.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has rallied for 7 days and is now testing the 3 month bear trend line. More importantly, it is also testing the February 28 lower high. A bear trend needs lower highs. If the bulls can break above 1.1420, there will then be a higher high. That would make it likely that the 3 month bear trend has ended. Instead, the chart would be back to a trading range.
The 3 month bear channel reversed up from a wedge bottom. That is a sell climax, which typically leads to at least a 2nd leg up. Therefore, the bulls will buy the 1st 1 – 2 week selloff, expecting a higher low.
If they get a selloff with a good buy signal bar, there will be a higher low major trend reversal. A major pattern has a 40% chance of leading to a swing up. The target would be the top of the 4 month range at 1.1570.
With every strong selloff and rally over the past 4 months, I have said trading ranges resist breaking out. Furthermore, I said that traders should expect reversals and not the start of a trend. This continues to be the case. Traders are waiting for clear information from Brexit before they look for a trend up or down.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 40 pips overnight in a tight bull channel. It is being drawn up to the bear trend line, which is only 5 pips above today’s high. However, the tight bull channel makes a bear trend day unlikely. Consequently, the best the bears will probably get today is a 30 pip tall trading range.
A more important target is the February 28 lower high. Since it is 50 pips above today’s high, the bulls will probably not get there today. In addition, today is a 2nd leg up from the small pullback on Thursday. Therefore, the bears will try to get a reversal down this week from below the February lower high.
That would be a micro double top. But, even if they can begin a 1 – 2 week selloff, the bulls will buy it, expecting a 2nd leg sideways to up after the March wedge bottom.
Entering the sell zone
Because the bulls will take profits around the bear trend line or just above the February 28 lower high, this rally will probably end this week. However, it has been strong. In addition, after the March 7 wedge bottom, a higher low from below 1.13 is likely within a couple weeks.
Can the rally continue up to above the top of the 4 month range without more than a 2 – 3 day pullback? Yes, but that probably will not happen because the daily chart is still in a trading range. Every strong leg up and down has reversed within 2 – 3 weeks.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely 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 currently in the market, these entries would be logical times for him to enter.
End of day summary
Today was a trading range day. After breaking above last week’s high, there was a strong selloff. But, it formed a higher low compared to the end of Friday. The bulls then got a 2nd swing up to close the day on its high.
The Emini has been in a trading range for 16 months. Most breakouts fail when a market is in a trading range. The bulls broke above the resistance of the 2825 triple top on the daily chart. Consequently, last week’s breakout will probably fail within the next 2 weeks.
The minimum target for the bears is the most recent higher low on the daily chart. That is the March 8 low of 2726.50. The bulls want a new all-time high, which is about the same distance away.
What about the next few days? Since the breakout was not big, the bulls are disappointed. That makes them hesitant to buy. The bears did not want the breakout. They are hesitant to sell. This confusion typically results is sideways price action, which is likely for a few days. In addition, Wednesday’s FOMC report is another source of confusion and hesitation.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.
Al can we wait some more q/a with you in the future? Like “Ask Al” update?
Hi Roberts,
Yes, more Ask Als will be coming soon. Just clearing the trading course video fixes for subtitles work first and nearly done.