Emini catalysts are FOMC report, healthcare repeal, Mueller, and Sessions
Since yesterday was a small trading range day, there is an increased chance that it could lead to a measured move up or down today. However, the Emini has early trading range price action. It reversed down from a test of yesterday’s high. Then, it formed a weak opening reversal up from the moving average. Furthermore, it is within yesterday’s tight range. This is therefore a trading range open, and it increases the odds of a 1 – 2 hour trading range. In addition, today is an FOMC day, which also increases the odds of a trading range before the 11 a.m. announcement.
If there is a strong breakout up or down, traders will swing trade, but the odds are that today will have a lot of trading range trading before the 11 a.m. report.
Pre-Open market analysis
While yesterday gapped up to a new all-time high, it spent most of the day in a tight trading range. Since it closed near its low, it is a sell signal bar on the daily chart.
Because today has an FOMC announcement at 11 a.m., the Emini has an increased probability of a strong trend after the report. Traders therefore have to be ready for a big breakout up or down.
There are buy climaxes on the daily, weekly, and monthly charts, but no top or reversal down yet. The momentum up is strong, and climaxes can extend much farther than what seems reasonable. Consequently, there is an increased chance of a strong trend after the report. Finally, the Emini usually is in a fairly quiet trading range for the hour or two before the report.
Day trading after the FOMC announcement
Most traders who want to enter after the report should wait at least 2 bars. This is because there is a 50% chance that the 1st breakout will reverse. Over the past 2 years, there have been far fewer strong trends after FOMC reports. Therefore, the odds favor trading range trading after the report. However, because the Emini is in a buy climax, if there is a trend, it could be very big.
Overnight Emini Globex trading
The Emini is up 5 points in the Globex market. The bulls see yesterday’s late selloff as a test of the selloff on yesterday’s open. It is therefore a double bottom bull flag. The bulls want a breakout above yesterday’s high, which is the neck line of that double bottom.
While the trading is usually normal for the 1st few hours, the Emini typically enters a tight trading range in the 1 – 2 hours prior to the FOMC announcement. I never care about what the Fed does. All I want to know is whether the Emini is going up, down, or sideways after the report. I base my trading decisions on the price action, which represents the consensus of all institutions.
It’s hard enough making day trading decision in the limited time that we have. If we have to try to understand all of the variables involved with the report in addition to our day trading responsibilities, most traders would find it impossible to trade profitably.
EURUSD Forex market trading strategies
The weekly EURUSD Forex market has rallied strongly for 7 months. However, the rally has had a series of consecutive buy climaxes. This is therefore a type of parabolic wedge buy climax. Hence, traders should expect a trading range soon.
While the big bull trend bars represent strong bulls, the bad follow-through after each bar is a small exhaustion area. This type of rally usually leads to a bigger pause, like about 10 bars and 2 legs. The minimum goal for the pullback is the bottom of the most recent buy climax. That means about a 250 pip pullback to last week’s low.
Because buy climaxes can continue for a long time, this rally might continue to above the bottom of the July 2010 breakout point of 1.1876 before pulling back. However, the pullback typically begins after 3 – 4 climaxes, and this rally has already had at least 3.
Can the bull trend continue for a measured move up from the 30 month trading range? Even if it does, this rally represents exhausted bulls. Therefore the odds still favor a pullback beginning within a couple or weeks, or after 1 more buy climax next month.
Overnight EURUSD Forex trading
The rally on the daily and weekly charts is a buy vacuum up to resistance. The odds favor a reversal down into a bear leg in a trading range soon. Because today has an FOMC announcement, there is a catalyst for a big move up or down.
All financial markets usually enter tight trading ranges for at least 2 hours prior to the Fed interest rate announcement at 11 a.m. PST. Furthermore, the EURUSD Forex market has been sideways for 4 days. The odds are that today will continue the trading range price action into the report.
There is usually a breakout after the report. Yet, 50% of breakouts reverse. Therefore, day traders who want to trade after the report should wait at least 10 minutes before entering. In addition, they will have to make quick decisions because the bars are often big and reversals are common.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini is in a strong bull trend on all higher time frames. However, the rally is climactic. Therefore the odds favor a pullback soon. A pullback on the monthly chart will probably last 2 – 3 bars, which means 2 – 3 months.
Bulls will continue to buy until there is a strong reversal down. Because the climax is so extreme, many investors prefer to wait for a pullback, like to below the weekly moving average.
By trading below yesterday’s low, the bears triggered a sell signal on the daily chart. However, the bears still strong selling over the next few ways. Otherwise, the reversal will be minor, look all of the others. While the buy climax increases the chances for a 2 month pullback, the odds that any one reversal attempt will start the pullback are small. It is more likely that the Emini will continue up or go sideways than reverse.
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.