Emini island top and bull flag going into FOMC announcement
Pre-Open market analysis
Yesterday sold off from the open after failing to close the gap below Friday’s low. But, it reversed up twice at the end of the day and held around Monday’s low.
This is a 2 day trading range going into today’s FOMC report. The 11 a.m. PST report usually has a sharp reversal in the 1st 10 minutes. Day traders should exit positions about an hour before the announcement and not trade again until at least 10 minutes afterwards.
The bears want Friday’s sell signal bar to be the top for a move down to the 20 week EMA. However, the bulls want the 2 day selloff to be a pullback in a bull trend. The probability is about the same for both. A big breakout up or down today would provide clarity. If today remains sideways after the 11 a.m. FOMC announcement, traders will have to wait until tomorrow or later for clarity.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex session. Today will therefore probably open in the middle of the 2 day range. The 2 day range increases the chances of more trading range trading ahead of today’s FOMC announcement. If there is a strong trend ahead of the announcement, day traders will swing trade.
Does it matter if the Fed raises rates? No. All that matters is whether the institutions buy or sell after the report. The report itself is meaningless. Day traders simply have to wait and trade what is on the chart in front of them, and not worry about what the Fed does.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart had a strong bull trend reversal in August and it is now at the top of its 5 month range. The rally is forming a double top with the July high. In addition, there is a micro double top over the past 4 days. The odds favor lower prices for a week or two. Also, trading ranges resist breaking out. Therefore, the bulls might have to wait more than a month before they see their breakout.
An ioi is a Breakout Mode pattern. The bulls want a breakout above the June high. But, the parabolic wedge makes a 200 pip pullback more likely over the next week.
While the bears want a break below the August 15 low, the reversal up was strong enough to make a bull trend more likely. Consequently, the bulls will buy a 200 – 300 pip selloff, knowing that a higher low is more likely than a bear trend.
The odds favor a 1 – 2 week selloff down to below 1.16.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 45 pips in a tight bear channel over the past 3 hours. It is testing yesterday’s low. While the ioi on the daily chart is a breakout mode pattern, yesterday was a bull day. That is a weak sell signal bar for today. Therefore, there are probably buyers not far below yesterday’s low. Consequently, the overnight selloff will probably stall there. This is especially true because financial markets tend to enter trading ranges on the mornings of FOMC reports.
Will there is a big trend after the 11 a.m. PST report today? There sometimes is, even though the Forex markets usually enter tight ranges by 11 a.m. Day traders will probably scalp until then and exit positions about an hour before the report. Since there is usually a fast reversal in the 1st 10 minutes after the report, they should wait until at least 11:10 a.m. PST before resuming trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied after the FOMC report, but reversed down from above yesterday’s high. By trading below yesterday’s low, today was an outside down day. The bears are breaking below the 3 day range. They need follow-through selling tomorrow. The targets below are the bull trend lines and the 20 week EMA.
The 3 week rally looks more like a bull leg in a trading range than a bull trend. That makes a 2 – 3 week bear leg likely to begin within a couple weeks. It probably began on Friday.
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.
What’s the difference between trades that are in red and in green?
I use a green box to represent a reasonable buy entry and the red box to represent a sell entry.