Emini minor reversal up from October low and 2600 Big Round Number
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday reversed up from below the October low and the 2600 Big Round Number. Because the day closed near its high, it is a reasonable buy signal bar for today. The bulls want the failed breakout to begin a yearend rally.
However, the 5 day bear channel has been tight. In addition, yesterday’s body was relatively small. Finally, reversals in trading ranges typically disappoint traders who are hoping for a trend. Consequently, while the odds favor at least slightly higher prices, the bulls need many bull bars closing near their highs. Without that, any rally from here will probably fail within 1 – 3 days.
The reversal up from major support is bad for the bears. However, it is consistent with the weekly chart being in a trading range and the monthly chart forming a bull flag.
Disappointing breakouts and reversals are more common in trading ranges than in trends. While the Emini has sold off strongly over the past week, the selloff is still probably a bear leg in a big trading range.
The Emini is in search of a bottom. Because legs in a trading range often fall further than what might be likely, this selloff might continue to the monthly bull trend line below 2400 before reversing.
Although yesterday is a buy signal bar on the daily chart, the bulls will need several bull days before traders believe that yesterday is the final low.
Overnight Emini Globex trading
The Emini is up 33 points on the Globex chart. Today will therefore probably gap above yesterday’s high. That will trigger the buy signal on the daily chart. Because the daily chart is oversold and reversing up from support, the big gap up has an increased chance of leading to a bull trend day.
When a gap up is big, the Emini is far above the EMA. Many traders do not like to buy far above the average price. However, it also reduces the chance of a big bear day. Consequently, there is only a 20% chance of a strong bull or bear trend from the open that lasts all day.
Most of the time, the Emini has at least one reversal in the 1st hour. The bulls look to buy a double bottom or wedge bottom near the EMA.
The bears want any early rally to form either a double top or a wedge top. They want to see several bear bars closing near their lows. That would be a sign of strong bears and increase the chance of a bear trend.
A big gap up increases the chance of a bull trend day. The bulls want the Emini to hold above the EMA for at least the 1st couple of hours. In addition, they will look for High 1, 2, and 3 bull flags just above the EMA. Finally, they like to see gaps and body gaps. These are all signs of a strong bull trend. If the develop, the bulls will swing trade.
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 market trading strategies
The EURUSD daily Forex chart has been sideways for 2 months. It is still in a bear channel. But, the bulls have a nested head and shoulders bottom. In addition, last weeks small rally broke above the top of a triangle. They hop that yesterday’s was only a pullback from that breakout.
The EURUSD daily Forex chart had a weak breakout above a month-long triangle last week. Yesterday was a big bear day that closed on its low. It is therefore a sell signal bar for today.
The bears want the bull breakout to fail and reverse down to a bear breakout. They then want the bear trend to resume. If today trades below yesterday’s low, that will trigger the sell signal.
But, since the chart is in a tight trading range, stop entries are low probability bets. Consequently, even though yesterday is a strong sell signal bar, the context is bad. Therefore, there are probably more buyers than sellers below yesterday’s low.
So far, today’s low tested yesterday’s low exactly to the pip. Today reversed up without triggering the sell signal. That is a sign of strength buy the bulls. However, without several consecutive bull bars and a close far above the November 7 1.1501 high, the 2 month trading range will still be intact.
Day traders will continue to mostly scalp, betting that any trend up or down will not go far. Reversals are more likely than breakouts. Until there is a strong breakout above 1.15 or below 1.12, there is no breakout.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart reversed up from yesterday’s low overnight. It tested the low to the pip. The bulls prevented the sell signal on the daily chart from triggering.
But the rally up from yesterday’s low has only been 50 pips. In addition, most of the bars were small and had prominent tails. Also, there were reversals down every few bars. The rally lacked consecutive big bull trend bars.
Traders correctly see the rally as weak. They therefore are willing to sell rallies in addition to buying dips. This is a bull leg at the apex of the month-long trading range on the daily chart.
If today trades below yesterday’s low, it would trigger a sell signal on the daily chart. However, because of the tight trading range over the past several weeks, most bears will not sell on a stop below yesterday’s low. Instead, they will wait to see if the breakout is big. Without that, traders will look for another reversal, which is more likely.
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.
The Emini reversed down from a big gap up. It sold off in a Small Pullback Bear Trend. The bulls again got a reversal up from the November low and last week’s low. Although today was the entry day for the bulls, the bear body disappointed the bulls.
The odds are that the Emini will stay near the close of last year for the remainder of this year. Reversals are still more likely than breakouts.
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.
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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.
