Possible Emini October bear trap
I will update again at the end of the day.
Pre-Open market analysis
The Emini broke above the bear ii on the daily chart yesterday and formed a big bull trend from the open. While good for the bulls, they need follow-through buying for at least 1 – 2 more days before traders conclude that last week was a bear trap. Without that, the odds still favor at least a small 2nd leg down to test the close of last year.
Confusion usually leads to a trading range. If there is no sustained buying or selling soon, the Emini will enter a trading range for the next couple of weeks.
Because yesterday was climactic, there is only a 25% chance of a strong bull day today. However, there is a 50% chance of some follow-through buying within the 1st 2 hours. It could start on the open.
Finally, a climax means that the bulls get exhausted. There is therefore a 75% chance of at least 2 hours of sideways to down trading that starts by the end of the 2nd hour.
That does not necessarily mean a bear trend. It only means at least a couple of hours of trading range trading. Yesterday was so strongly bullish that there is an increased chance of at least a modest bull trend today.
Overnight Emini Globex trading
The Emini is down 12 points in the Globex session. This increases the chance of an early trading range after yesterday’s buy climax. Even if today is a bear day, yesterday was in a tight bull channel and that will limit the downside for the rest ot the week.
It is unlikely that today will gap up and then rally in a strong bull trend day. More likely, yesterday was exhaustive. The bulls will take profits and wait to see how far down the bears can go. Once the bulls sense that the bears are taking profits and will not sell at the low, the bulls will begin to buy. This should result in at least a couple hours of trading range trading today.
The final hour is important. If last week was a bear trap and yesterday was the start of a bull trend, the bulls will do bullish things. One thing they can do is buy into the close so that today will form a consecutive bull trend day. If the Emini is off the high after 11 a.m. PST, day traders should look for a buy setup that could lead to a rally into the close.
Alternatively, if yesterday was just a relief rally in a bear trend, there should be bad follow-through buying today. Therefore, if the Emini is near the high after 11 a.m. PST, day traders will look for a sell setup that could lead to a reversal down to below the open. That would create a bear body on the daily chart. Today then would be a bad follow-through day and it would reduce the chance of a continued strong reversal up on the daily chart.
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 parabolic wedge rally to minor lower high
The EURUSD daily Forex chart is turning down from a parabolic wedge lower high. It should find support around the October 9 higher low.
For the past 4 days, I said that there would probably be a parabolic wedge lower high. Furthermore, it would lead to a 3 – 5 day pullback to test the October 9 high or low. The EURUSD is turning down, as expected. But, the odds are that it will form a double bottom with the October 9 low.
The bears see a head and shoulders top where August 28 formed the left shoulder. They currently have a 30% chance of a measured move down to below the August 15 low. However, there will probably be a 2 legged, 3 – 5 day selloff to below 1.15.
There is no sign that the 6 month trading range is about to break out. Traders expect reversals after every 5 – 10 day leg up or down.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 100 pips from yesterday’s high. In addition, the selloff over the past 2 hours has been strong. But, there is support around the October high at around 1.15.
After a wedge rally, the selloff will probably have 2 legs down. That means that there will soon be a bounce. The 1st leg down should end this week. Consequently, today will probably transition into a trading range as the 1st leg down looks for a bottom. Traders will stop swing trading their short positions and begin to scalp up and down.
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.
After a strong selloff to the 60 minute EMA, the bulls reversed the day up to above yesterday’s high. The Emini then stalled. It was not yet strong follow-through buying after yesterday’s big bull day. This failure increases the odds of more sideways trading tomorrow.
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.
Trading Room
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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.
