End of day comments about today’s Emini price action and day trading
The Emini began as a trading range day and had a 10 point rally to a new high of the day. However, strong second legs up and down during trading range days are often traps, and this one was a good example. The market reversed down at a new high of the day at the 60 minute moving average and the bear trend line. The rally was also a parabolic wedge top.
The Emini then broke to a new low of the day and it fell below the 60 minute double bottom, triggering the lower high major trend reversal, which is almost always a head and shoulders top. It also fell below the July high, closing the gap on the monthly chart and turning the July monthly candle into a possible exhaustion gap bar.
The Emini rallied a little at the end of the day and closed above the neck line of the major trend reversal and above the July high. It is still with the 10 day tight trading range.
S&P500 Emini intraday market update for price action day traders
Time of update 7:54 a.m. PST.
The Emini is trying to form a trend reversal at the bottom of the trading range that has lasted 2 weeks. There are several strong bull trend bars to support a move up. If it holds this area, it could rally back to the open. If it breaks strongly below the lows, the day could be a big bear trend day.
The selloff on the open fell 8 points. This makes a bull trend day unlikely. Although the Emini can rally above the open, the chances of a bull trend day are small because this selloff would create an 8 point tall tail on the bottom of the daily candle. This would be unusual. It is more likely that today will be a bear trend day or a trading range day. If it becomes a trading range day, it could rally all of the way up to a new high of the day. It is unlikely that the day would close much above the open because it fell so far below the open.
Two days ago, the 5 minute Emini had a strong reversal up from the bottom of the two week trading range. It pulled back yesterday. The bulls see this bear channel as a bull flag. The bears see it as the start of a bear trend. They see the rally as a lower high major trend reversal. Until there is a breakout up or down, it is more likely that the tight trading range will continue. Day traders should continue to assume that breakout attempts up and down will fail until they see one that has succeeded.
S&P500 Emini 60 minute, daily, weekly, and monthly candle charts
The 60 minute Emini chart is the most interesting at the moment. It has been in a tight trading range for over two weeks and it finally created a lower low last week. If it turns down, this 2 day rally will create a lower high major trend reversal setup (a head and shoulders top). The trading range has lasted long enough so that the probability of a successful breakout to the downside is about the same as that for a bull breakout.
The 60 minute Emini also has a double bottom bull flag with both lows just above the July high. This is a key support level. There is now a well defined gap. The bulls want it to become a measuring gap, which means that they need the upside breakout and a measured move up, which would be near the top of the channel on the weekly chart. The bulls are taking a long time to move above the July high. If there are not enough bulls soon, the Emini will have to go lower to find more buyers. Think of the tight trading range as a cantilevered bridge. If that bridge extends out too far, gravity will pull it down.
If the Emini turns down from this current two day rally and then falls below that double bottom, many traders will conclude that the bull flag will have failed. They will then look for a measured move down based on the height of the 60 minute tight trading range.
That move down would be below the July high. The candle on the August chart closed above the July high, again allowing traders to see the gap between the support of the July high and the resistance of the August close. Just like on the 60 minute chart, the gap might be a measuring gap or an exhaustion gap. Since the monthly chart is so overbought, the odds favor an exhaustion gap. If the gap is closed, the Emini might trade down for a few bars on the monthly chart. This pullback might be 100 – 200 points on the daily chart.
See the weekly update for a discussion of the weekly chart.