Gap up bull trend
Posted 8:06 am PST.
The most important price action in today’s Emini intraday report is the resumption of the bull trend on the weekly chart after last week’s reversal attempt. It is in a gap up bull trend at the moment.
The Emini opened with a big gap up, which usually is followed by an hour or two of sideways price action until the market gets closer to the moving average. Many traders then wait for a breakout in either direction and then take a swing trade.
The market was in a tight trading range for the 90 minutes, which usually reduces the extent of any move after the breakout. This makes a trend day with a big range less likely and it increases the chances of either a small trend day or a trading range day. The bulls want to get above last week’s high to trigger the weekly breakout pullback buy signal (last week is a high 1 buy setup). The bears want the tight trading range to be the final flag in the bull trend, and for the market to reverse down.
The range for the first 90 minutes was only 3.5 points and it should increase. It can do so by trending up, reversing down, or both. At the moment, the market is always in long and trying to trigger the weekly buy signal, but the chances for a big move up or down are limited unless the market has a strong breakout up or down or forms a small pullback trend. So far, there has not been a good trading opportunity. Traders should either be swinging a long or waiting for a breakout in either direction.
Weekly Emini chart as of Monday, July 14, 2014
The weekly chart has a 10 bar bull microchannel, and last week was the first bar on the weekly chart that dropped below the low of a prior bar (the prior week’s low). However, the market has about a 2/3 chance of beginning a bigger pullback after a test of the top of the bull microchannel. This means that the market will usually rally for about 1 to 3 bars (weeks, since this is the weekly chart), and then have at least TBTL (Ten Bars, Two Legs) sideways to down. Bears with therefore be buying puts or put spreads above the top of the microchannel, or around 1980 – 2000 on the Emini.