Day trading the last day of the month
The Emini opened at the 60 minute moving average, which is the middle of the 12 day tight trading range. The 1st bar was a big bull trend bar, but the follow-through was bad. This reduces the chances of an hour or two of follow-through buying. It therefore also increases the chances that a couple of hours of sideways to down trading has already begun.
This early Limit Order Market increases the chances of a lot of trading range trading today. Yesterday was an inside day after consecutive outside days. Today might be a 2nd consecutive inside day within the 12 day tight trading range.
While the Emini can have a strong trend up to a new all-time high today or down below the 12 day trading range, it will more likely be a trading range day. It will still probably have at least one small swing up and down. If it becomes a trend day, it will probably be a weak trend, like a trending trading range or broad channel day.
At the moment, the Emini is Always In Short, but it has not yet broken strongly below the 60 minute moving average. If it does, the next target is yesterday’s low. The bulls want the bear breakout to fail and reverse up from a double bottom. The odds still favor mostly trading range trading today.
Pre-Open Market Analysis
The Emini formed an inside day yesterday after consecutive outside days. Because the Emini has been in a tight trading range for 11 days, any one day is not important. The Emini is in breakout mode. The probability still favors a bull breakout. As a result of the Emini being overextended on the daily chart, the upside is probably limited. It will probably begin a 40 – 100 point pullback within a week or two.
Because yesterday ended with a buy climax, there is only a 25% chance of a strong bull trend today. Yet, there is a 50% chance of follow-through buying within the 1st 2 hours. The bears have a 75% chance of at least a couple of hours of sideways to down trading beginning by the end of the 2nd hour.
Last trading day of the week and of the month
Today is the final trading day of week and month. Therefore, weekly support and resistance can be important, especially in the final hour. There are no monthly targets within reach today other than the high of the month. The bulls want the month to be a big bull trend bar closing on its high. The bears want a selloff today to put a tail on top of the bar.
The weekly chart has a small bar this week after 4 weeks of shrinking bull bodies. This week traded one tick below last week’s low and the bulls want it to close above last week’s high. Hence, the week would be an outside up bar. Traders would therefore see it as a sign of strong bulls. This is despite the week so far having a smaller bull body than last week.
The top of the 11 day tight trading range is the all-time high. The bulls would like a weekly and monthly close at a new all-time high as a sign of strength. Yet, traders need to see follow-through buying next week and month to trust that the breakout will continue higher in August. The odds still favor a 40 – 100 point pullback from a new high.
Emini Globex session
The Emini is down 4 points in the Globex sessions. If the Emini opens here, it will again be at the day session’s 60 minute moving average. This has been the magnet of the past 12 days.
Forex: Best trading strategies
The EURUSD daily chart turned up from the bottom of the month long trading range this week. Yet, the rally lacked consecutive big bull trend bars, Furthermore, yesterday was a reversal bar. This rally is probably just a bull leg in the trading range.
The bears want the July selloff to continue down in its tight bear channel. The bulls want a reversal up from the bottom of the trading range. Both will probably be disappointed because that is what happens in a trading range. As a result, the trading range continues. Markets have inertia and resist change.
Eventually, there will be a breakout, but traders make more money betting that the price action will continue that betting it will change. Because the EURUSD has been in a trading range, most days are relatively small, and most traders are primarily scalping.
European Globex session
The EURUSD Forex chart rallied over the past 6 hours and is testing yesterday’s high. The bears want a double top and a resumption of the bear channel. The bulls want a breakout above yesterday’s high and then a test of the July 14 lower high of 1.1164. They then want a strong breakout above the 1.1186 top of the July trading range. Both the bulls and bears want a successful breakout from this 200 pip range. The side that wins then wants at least a 200 pip measured move.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini broke above the 12 day tight trading range, but the breakout was small. While the bears might get a bear breakout next week, it is still more likely that the bulls will get a successful breakout. It might hold for a couple of weeks. Whether or not the bulls get a 20 – 40 point rally, there is still a 60% chance of a 40 – 100 point pullback in August.
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.