Emini possible minor double top at August all time high
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied last week, but the rally lacked consecutive big bull bars. It therefore looks more like a leg in a trading range than a bull trend.
Friday closed with a bear body and it a sell signal bar for today. Since it was a doji bar, it is a weak sell signal.
Thursday gapped up so a gap down today or any day this week will create an island top. If today simply sold off and closed the gap, the gap would be an exhaustion gap. Therefore, there is an increased chance of a bear trend day today and for the start of a leg down.
Island tops, island bottoms, and exhaustion gaps are minor reversals. But, a minor reversal could last several weeks and test support around 2800.
Overnight Emini Globex trading
The Emini is down 4 points in the Globex market. It will therefore probably open in the middle of the 2 day range. Traders are deciding if last week’s rally is a resumption of the bull trend or just a bear leg in a 3 week trading range. The more bull bars that form on the daily chart, the more likely the bull trend has resumed. The lack of consecutive strong bull days over the past 6 days makes a bull leg in a trading range more likely. That means that the odds favor sideways to down over the next week or two.
Because the Emini is testing the important January high, there is an increased chance of a big trend day up or down. However, since most of the days over the past 3 weeks have spent most of the time in trading ranges, that is likely again today.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I sometimes 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 in a position at the moment, these entries would be logical times for him to enter.
EURUSD Forex pullback from test of top of 5 month trading range
The EURUSD daily Forex chart reversed most of Friday’s selloff overnight. Friday was probably a pullback from a test of the top of the 5 month range and not the start of a bear trend reversal.
I said last week that traders would sell above bars and buy below. On Friday, they sold above Thursday’s high, and today they bought below Friday’s low. This is what typically happens in a trading range.
As strong a bear day as Friday was, the daily chart is now in a bull trend. Therefore, Friday was likely simply a pullback from a 4 day rally that was testing the top of the 5 month range.
The bears want Friday to be another lower high in a 5 month series of lower highs. They then want a new low below the August low. That would indicate that their broad bear channel is still intact. However, the reversal up from the August 15 low and the context makes a bull trend more likely on the daily chart. Therefore, selloffs are probably just pullbacks in an early bull trend.
Trading ranges resist breaking out. As a result, the daily chart could go sideways for months before the bulls break strongly above the June 15 top of the range at around 1.1850. More likely, they will get a minor break above the July 31 sell climax high of 1.1747 within 1 – 3 weeks. If so, that breakout could reverse back into the range. Whether or not it does, the odds still favor a strong break above 1.1850 before a break below 1.13.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart rallied 60 pips overnight. But, it is now close to the top of its 4 week range within the top half of the 5 month range. Since most breakout attempts fail, the odds are that the overnight rally will stall today or tomorrow and continue the 4 week range. Consequently, despite the good overnight rally, day traders will look to sell reversals down from above 1.17. Because the daily chart is in an early bull trend, day traders will keep buying selloffs, like below Friday’s low.
The overnight rally has had 3 pushes up in a tight bull channel. That is a potential parabolic wedge buy climax, which typically transitions into a trading range lasting at least 10 bars.
The bulls do not need today’s rally to extend above Friday’s high and form an outside up day. However, they want today to close near its high. Day traders will therefore buy pullbacks to make the day close near its high. Today would then be a strong buy signal bar for tomorrow. Then tomorrow, they might buy above today’s high for a test of 1.1750 this week.
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 sometimes 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 in a position at the moment, these entries would be logical times for him to enter.
Most of the bars today were in tight trading ranges. That is better for limit order traders. Stop entry traders should not trade in tight trading ranges. The bears had a swing down late in the day.
By trading below Friday’s low, today triggered a minor sell signal. Today also closed the gap above Wednesday’s high. That gap is now an exhaustion gap. But, exhaustion gaps are minor signals. Therefore, more trading range trading is more likely that a bear trend on the daily chart.
There is still a bull trend line below. The odds are that the Emini will get there this week by trading sideways to down. Will it get down to the lower bull trend line as well? The bears need to get consecutive big bear bars. Without that, the odds are that the 4 week trading range will continue.
Other magnets below are the January high and the 20 day EMA. The odds favor at least slightly lower prices over the next few days.
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.
