The Emini gapped up, but the first bar was a bear reversal bar and the 5 and 60 minute charts are overbought. This is a possible failed breakout to a new all time high. The bulls want the gap to stay open and become a measuring gap, and the bears want it to close and become an exhaustion gap. They they want at least a TBTL (Ten Bar, Two Legs) correction on the 60 minute chart as their minimum goal.
Because this is Christmas week, the odds are that most of the week will be spent within tight trading ranges. However, there might be a couple of swings, and they are designed by the computers to take money from traders who blindly are fading every move without thinking about whether the context is right.
Until there is a clear breakout with follow-through up or down, traders will assume that the moves will be small and limited. Traders will mostly scalp and take few trades. They will also look for reversals. However, if the Emini does enter a trend, they will consider swing trades.
As I am writing, the Emini is trying to reverse down and is probably always in short, but the selloff is lacking consecutive big bear trend bars and it is so far holding above yesterday’s high. The bulls are still hoping for an opening reversal up from above yesterday’s high. The bears want a strong reversal. More likely, the initial selling will become a bear leg in another trading range day.
Summary of today’s price action and what to expect tomorrow
Today was another small Christmas week tight trading range day. The initial sell off had bad follow-through after every bear bar and that made it likely to be only a bear leg in a trading range. Once it dipped below support, that further increased the chances of a trading range day instead of a bull trend day.
The rally was weak and it formed a wedge lower high. Once it was clear that the bulls would be unable to get above the high of the day, it reversed down and tried to reach the low. It failed and closed in its middle.
Tomorrow closes early and both tomorrow and Friday will probably be small days with mostly tight trading ranges. However, a big trend can occur at any time, as it did on New Year’s Eve in 2009.
See the weekly update for a discussion of the weekly chart and for what to expect going into next week.