Emini weak selling after 2 day island top ahead of FOMC
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped down yesterday and formed a 2 day island top. However, yesterday was not a strong bear trend day. While Friday might be the high of the next several weeks, the bears need a series of bear bars to take control. The odds still favor higher prices, even if there is a 3 week pullback.
If today trades above yesterday’s high, but there is a reversal day later this week, there would be a micro double top with Friday’s high. That would be a possible sell setup for a 2 – 3 week pullback.
If today gaps up today and rallies, it will form a 1 day island bottom. It could simply rally and close yesterday’s gap. Either way would erase the bearishness of the 2 day island top.
The Emini probably will stay sideways into tomorrow’s 11 a.m. PST FOMC announcement. It then could move sharply up or down. However, most FOMC reports in recent years have not had strong follow-through. Each was usually just another day.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex session. It might therefore gap up, which would create a 1 day island bottom. However, a small gap up typically closes in the 1st hour.
A gap up or a closure of yesterday’s gap down would make the Emini neutral going into tomorrow’s FOMC report. Since the Emini usually tries to become neutral ahead of a catalyst, the odds are against a big trend day up or down today. Yesterday’s trading range also increases the chance of a quiet day today.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. 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 ioi bull flag but parabolic wedge top
The EURUSD daily Forex chart today has an inside day after yesterday’s outside day. This is an ioi (inside-outside-inside) bull flag. There is also a potential measuring gap below yesterday’s low. But the 3 week rally is also a parabolic wedge at the top of a 5 month trading range.
If today remains a bull inside day, it will be a buy signal bar for tomorrow. Since yesterday was an outside day, the pattern would be an ioi bull flag. But, it is at the top of a 5 month trading range and most breakout attempts fail. Furthermore, the 3 week rally is a parabolic wedge. While the momentum favors the bulls and an eventual rally to 1.20, the chart is more likely to pullback for the next couple of weeks.
Traders should find out over the next few days. If there are 2 – 3 big bull bars, the breakout will probably continue to 1.19 to 1.20. On the other hand, if tomorrow triggers the buy by going above today’s high, but tomorrow or Thursday close near their lows, the breakout will likely fail. If so, there will probably be a 200 pip pullback over the next 2 weeks.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has rallied 50 pips overnight. Since the bulls do not need today to go above yesterday’s high, there might not be much left to the rally today. However, the bulls do want today to close near its high, and especially above the midpoint. This would create a good buy signal bar for tomorrow. Therefore, the bulls will buy 20 – 30 pip selloffs today.
The bears would like today to close near its low. Then today would be a bear ioi and a sell signal bar for tomorrow. At the moment, this is unlikely. The best the bears can reasonably hope to achieve is to prevent today from closing on its high. They will therefore sell rallies for 10 pip scalps.
Their next goal is to get today to close below the midpoint. If there is strong momentum down, they might even get a close below the open, but that is unlikely at the moment.
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.
There were several reasonable stop entry buys on the open that failed. Scale in bulls still theoretically made money by buying more lower.
Despite a strong reversal up from the August high, the bears got a new low of the day after a 22 bar bear micro channel. That is extremely relentless selling, and therefore a sell climax. The bulls reversed the selloff up from just above yesterday’s low. That prevented an outside down day. However, the Emini stayed sideways into the close.
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.
