Emini sideways waiting for FOMC meeting
Today opened with a doji bar in yesterday’s 4 hour tight trading range. This increased the chances that today will be another trading range day, like the past 2 days.
While the bears got 2 strong bear bars on the open, the next bar was a bull reversal bar. This is bad follow-through, and it increases the odds of an early trading range. The bulls want an opening reversal up from below yesterday’s 4 hour trading range. Yet, the 2 big bear bars are enough to make a minor reversal more likely.
Since traders want more information, the odds favor a trading range for the 1st 1 – 2 hours. In addition, there is an increased chance of another trading range day.
Pre-Open market analysis
The Emini has parabolic wedge tops on the daily and monthly charts. Furthermore, the weekly chart has an extreme buy climax. This therefore increases the chances of a reversal down for a couple of months. Yet, there is no top, and until there is a top, the odds favor higher prices.
Since Friday traded below Thursday’s low, it triggered the sell signal on the daily chart. However, when a parabolic wedge top sell signal triggers, there is rarely a strong reversal down. Instead, the Emini usually begins to pull back in a tight bear channel.
Hence, this means that the bars are usually small and the days are mostly trading range days. Therefore, if last week was the start of a correction, the correction will probably be mostly sideways for at least a week.
Friday is also a buy signal bar in a strong bull trend on the daily chart. Since it closed on its high, the odds are that today will trigger the buy signal by trading above Friday’s high. Yet, because of the parabolic wedge top and Wednesday’s FOMC announcement, the odds favor mostly sideways for a couple of days.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex market. This means it is within a couple of points of Friday’s high. Since Friday is a strong buy signal bar in a bull trend, the Emini will probably not be able to escape the magnetic pull above Friday’s high. Consequently, the odds favor a test above Friday’s high. Yet, because of the parabolic wedge top, Wednesday’s FOMC announcement, and consecutive trading range days, the odds are against a a strong rally today.
The parabolic wedge rally might have one more strong push up before leading to a 5 – 10 bar pullback. Traders therefore have to be prepared for a possible bull trend day. A strong bear trend day is less likely, and today will probably be mostly a trading range day.
EURUSD Forex market trading strategies
The 6 month rally in the EURUSD Forex market has been strong, especially over the past 4 months. Yet, the weekly chart has had a series of buy climaxes. Since that typically leads to a 5 – 10 bar pullback (weeks, since this is a weekly chart), that is likely here.
The daily chart had a strong enough breakout on Thursday to make at least a small 2nd leg up likely. That might be enough to break above the 30 month high. However, most trading range breakouts fail. In addition, a series of consecutive buy climaxes like those on the weekly chart usually leads to a pullback. Furthermore, the daily chart has a parabolic wedge and is at a measured move up from the early July wedge top. Consequently, while the bulls have strong momentum, the bears have a buy climax at resistance.
Minor reversal into small trading range soon
Since both bulls and bears have good technical factors, the odds favor a more balanced market soon. As a result, a trading range is likely to begin this week. The minimum goal would be a couple legs sideways to down over 2 weeks. Yet, it could last longer.
The monthly chart has 4 consecutive strong bull trend bars. This means that the bulls are eager to buy. Therefore, they will probably buy the 1st 1 – 2 bar pullback. Hence, the best the bears can probably get over the next couple of months is a pullback into a bull flag on the monthly chart.
Overnight EURUSD Forex trading
The 5 minute chart has been sideways for 3 days. Furthermore, the range has only been 20 pips over the past 4 hours. In addition, Wednesday’s FOMC announcement will probably limit any move for the next couple of days. Consequently, day traders expect to scalp today. While a trading range is likely, they will always be ready for a breakout up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
By trading above Friday’s high, today triggered a High 1 buy signal on the daily chart. Yet, the breakout was small. The Emini might try to rally again tomorrow. However, because of the parabolic wedge buy climax, the upside is probably small before Wednesday’s FOMC announcement.
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.