Emini buy signal bar after island top
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped down yesterday and formed a one day island top. But, island tops and bottoms are minor reversals. After trading in a tight range, the bulls got a small late rally. Since it closed near its high, it is a buy signal bar for today. If today gaps up, yesterday would be another island reversal.
The Emini has a double top and a double bottom over the past 7 days. It is therefore in a tight range and in Breakout Mode.
The 7 day tight trading range shows no sign of ending yet. At the moment, one more leg up above the December 12 high is likely.
Even if the bulls break above the December 12 top of the crash, the odds are that the Emini will test last February’s low sometime in the next month. Traders will look for a test down to 2,500 at some point in February.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex session. It therefore might gap above yesterday’s high. That would create a 1 day island bottom.
However, an island reversal is minor. In addition, a small gap typically closes in the 1st hour. Finally, most of the trading over the past 6 days has been in a tight trading range. This is neutral, trading range price action. That is likely again today.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. 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 1st leg up in reversal up from bottom of trading range
The EURUSD daily chart reversed up sharply from a higher low at the bottom of the 4 month range. It has now retraced half of the 3 week selloff.
Yesterday’s body was smaller and had a tail on top. This is a sign that the 1st leg up is probably about to end.
Since the chart has been in a trading range for 4 months, the legs up and down typically subdivide into 2 or 3 smaller legs. Therefore, traders will buy a 1 – 3 day pullback to around the middle of the 3 day rally. They expect a 2nd leg sideways to up.
The bears hope that the 3 day rally will form a lower high. They need a strong break below the December low.
While the trading range will probably end in February, a bull breakout is as likely as a bear breakout. Furthermore, until there is a breakout, traders will bet on the range continuing. Consequently, they will look for reversals every few days.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart rallied and sold off 30 pips overnight. It reversed down from above yesterday’s high. Because yesterday had a tail on top, there is now a small double top. Traders expect a pullback below 1.14 over the next few days.
Since the 2 day rally was strong, there will probably be buyers between 1.1350 and 1.14 for a 2nd leg sideways to up. With yesterday stalling, day traders will expect more trading range price action today. They therefore will scalp for 10 – 20 pips.
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
The Emini reversed down from above yesterday’s high. It then reversed up from just above yesterday’s low. It spent most of the day in a tight range and closed in the middle 3rd. This is the 5th consecutive doji bar on the daily chart. There is no sign that the 7 day tight trading range is about to break out.
Traders are deciding whether there will be a brief rally above the December 12 lower high before a 50% pullback and a test of the 2,500 Big Round Number.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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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.
