Emini outside up day and micro double bottom
Pre-Open market analysis
The Emini had a big outside up day yesterday. It formed a micro double bottom with Friday’s low, and it is therefore a buy signal bar for today.
However, the 2 week selloff did not reach the bottom of the bull channel or last week’s low. Both remain magnets below. Unless the bulls get strong follow-through buying today or tomorrow, the odds favor sideways to down to the bull trend line. It is currently just below yesterday’s low.
If yesterday is the end of the 2 week selloff, the bulls will begin to create a series of bull trend days. Day traders should therefore be ready to swing trade if today begins to trend.
Can today reverse down? Yes. Remember, there are magnets below yesterday’s low. Also, yesterday’s high stopped at a 50% pullback from the 2 week selloff. As big a bull day as yesterday was, without follow-through today, it is just a bull bar in a 4 day tight trading range.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. If it opens here, it will be in yesterday’s 4 hour tight trading range. The bulls want trend resumption up, which is slightly more likely than a trend reversal down.
However, the Emini would not be going sideways if the bulls had a significant advantage. The bulls and bears are balanced, and day traders need to be prepared for a breakout up or down. Support below is at the 60 minute 20 bar EMA and the January high. Resistance is at yesterday’s high, which was a 50% retracement of the 2 week selloff.
EURUSD Forex triangle bull flag in 5 month trading range
The EURUSD daily Forex chart had a lower high on August 28. The bears hope that the 3 week selloff is a resumption of the 8 month bear trend. However, the reversal up from the August 15 low was strong. In addition, the 8 month bear trend is probably just a bull flag on the weekly chart. Therefore, the daily chart is likely in the early stage of a bull trend that will last many months.
Since the daily chart is now back in its 5 month trading range, it could stall here for a couple of months. In addition, it might break again below the June 21 low. But, the odds are that the August 15 low will hold and the rally will break above the 1.1850 top of the range before the bears break below the August 15 low.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has been in a 35 pip range overnight. That range is in the middle of a 3 week triangle and a 5 month trading range. Day traders will only scalp unless there is a strong breakout up or down. Since the daily chart is reversing every couple of days, the bulls will look to buy below yesterday’s low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini formed a trading range today. There was no follow-through buying after yesterday’s rally. This is because many bulls do not want to buy until there is a reversal up from the daily trend line, which is around yesterday’s low. Alternatively, they will buy higher if there is a strong rally tomorrow. The odds favor sideways to down to the bull trend line.
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.
In the price action of 9/12, the bull channel that formed from bar 14 had a bull breakout with the large bull surprise bar after the inside bar 20. I would think this fast extraordinarily large bull bar was a breakout test. Since the preceding bear breakout was strong, was it reasonable to expect a second leg down and assume that the bull channel is a bear flag and would have a bear breakout after the i bar? Did you notice anything in the bull channel that reduced the chance of a bear breakout?
I did not think that the selloff of the 1st hour was strong. In fact, in the chat room, I said that I expected a bull trend reversal.
Since the bar 21 bear bar was a bad buy signal bar, it increased the chance of a test of its high, which happened. However, the exceptional size of 21 made it more likely that the bears would not get their test. It was likely to have follow-through for at least 1 – 3 days. But, the bears in fact did get their test. Most traders assumed that the bull bar changed the market, and it did. Usually, the bulls get their follow-through buying later in the day, but sometimes it occurs on the next day.
Today I shorted below bar 4 for a reversal. As bar 7 was forming I thought my premise was no longer valid and exited above bar 6 only to watch bar 8 reverse. How does a trader decide to hold their initial stop (above bar 4) when thinking bar 7 changed the premise?
Thank you in advance
I have a few rules. After 3 bear bars, the odds were that there were sellers above. I therefore would keep my stop above 4. However, I sometimes get out above a strong bull bar. Bar 7 had a good body, but a tail on top. In addition, 8 did not go above it.
Another rule is that if I exit, but then decide that my premise is still good, I sell below a bear bar that closes near its low. Bars 6 and 8 were good choices.
I got in above bar 14 (Bull W @ 50% PB of yesterday’s range) for a swing. Should I have exited below bar18 (L2 @ just below MA from the Bear Perspective) or just let it go until it hit my stop (below bar14).
A swing trader would keep his stop below 14 since it was a big bull bar. Swings often have 1 or 2 attempts to fail. It is better to rely on the stop. If a bull got out below either of those bear bars, he could buy again above a bull bar, or at the stop for the bears.
thanks for the reply Al. That clears things up for me.