Emini Endless Pullback after January parabolic wedge rally
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off on the open yesterday. It then reversed up from below the prior day’s low. However, it closed with a bear body on the daily chart. In addition, it mostly overlapped Tuesday’s range.
Because it was the 2nd day in a pullback in a bull trend, it is a High 1 bull flag buy signal bar for today. But, after the 4 week parabolic wedge buy climax, the bulls are getting exhausted. The Emini will probably be mostly sideways to down for a couple of weeks. This is true even if there is one more push up to the December 12 lower high first.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. It has been in a narrow range overnight, continuing the 3 day tight trading range.
Yesterday’s 4 hour bull channel is a bear flag. The odds are that today will break below the channel. But, today will open in the middle of a 2 day tight trading range, and therefore probably be another mostly sideways day.
After 2 sideways days and the 4 week buy climax, the Emini will probably have a lot of trading range price action over the next couple of weeks. Traders will look for reversals every few days. Since the daily ranges have been big, there will probably be at least one swing trade every day.
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 testing bottom of 4 month trading range
The EURUSD daily Forex chart has sold off for 3 weeks after a failed breakout above the 4 month trading range. It is now testing the bottom of the range and the 1.13 Big Round Number.
Most trading range breakouts fail. Therefore, a reversal up within a week is more likely than a successful breakout below 1.12. The bulls need a reversal up, which they do not yet have.
Every trading range over the past year broke out after about a couple months. Consequently, the odds are that this one will break out within the next month. But, until there is a breakout, there is no breakout. Reversals are more likely than breakouts.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off overnight from a test of yesterday’s high. It broke below yesterday’s low and it is now testing the bottom of the January 3 swing up.
A more important support level is the December double bottom at 1.1270. That is therefore a magnet, and it is only 40 pips below today’s current low. Because it is important support, the selloff will probably end at least slightly above that level. As a result, the odds are against much more selling today.
However, the selloff has been strong enough so that the bulls will probably need a 2 hour trading range before they can get a reversal up. Consequently, any rally over the next couple of hours will probably be less than 30 pips.
Everyone is aware that the trading range will probably break out within the next few weeks. Therefore, traders need to be prepared for a series of trend days up or down beginning at any time.
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 that closed near its open. It is the 3rd day in a tight trading range. It was a doji inside bar and therefore a weak buy and sell signal bar. Traders are deciding if a 2 week pullback has begun or whether there will be one more brief new high 1st.
Tomorrow is Friday so weekly support and resistance can be important. The only nearby targets are the high and low of the week.
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, when you draw a wedge PB like today from bar 11,
is there any significant price meaning including pb of bar 11, since
its part of previous BO-PB and there is huge difference between bar 11 pb and the othe 2 legs
down? Isn`t it 2 legs PB more likely?
I understand the point,it does not matter what you call it, just trade it.
thx
Trends rarely reverse abruptly. There are usually several bars that are both part of the old and new trends.
Bar 11 is an example. It is a High 1 bull flag. However, I view it as also being the 1st leg down in the upcoming bear trend. It is impossible to know that until the bears took control on 15 or 16.
Wedges often begin before the prior trend ends. Here, 12 made a new high, and it was the top of the bull trend. But, I also see it as a higher high pullback from 11, the 1st leg down in the bear trend. This is true even though it went above the top of 10, which was the start of the bears beginning their swing down. It was the 1st sign of the bulls giving up and the bears taking over, even though the bulls were able to get one more new high.
Would I say that the bear trend began with 10 and 11? No, it began with 12. But, 10 and 11 were the start of the transition from up to down. 12 was the 2nd sell signal for the failed breakout above 4.
As you know, it does not matter how a trader describes what is happening as long as he makes the right trades. At a minimum, he exits longs below 13, and sells below 13 15 or 16.
thank you, much appreciated.