The Emini began with 4 consecutive bear bodies, but the bars had prominent tails, and stayed within yesterday’s trading range. This is trading range price action, which is also present on the 60 minute and daily charts. Although the Emini will probably trade below Friday’s low or today’s low this week, it will also probably trade above last week’s high this week or next week and begin to form a trading range. Trading ranges usually have a lot of trading range price action on smaller time frames as well, like on the 5 minute chart.
The Emini is Always In Short, but the selloff will probably end up as a bear leg in a trading range day, and the bulls can quickly reverse it to Always In Long with a couple of big bull bars and a new high of the day. Limit order traders have made money buying and selling so far, which is more common in trading range days than in trend days. While it is possible that today will be a trend day, a trading range day is more likely. If it is a trend day, it will still probably have a lot of trading range price action, like in a trending trading range day or a broad channel trend.
The bears want a break below Fridays low, and the bulls want a reversal up from above or below Friday’s low. The bulls want a breakout above last week’s high, and the bears want a reversal down from below or above last week’s high. Both bulls and bears will probably be quick to take profits, betting that the Emini will not go too far up or down.
Pre-Open Market Analysis
S&P 500 Emini: Day trading tip is to expect a trading range for 2 weeks
The Emini will probably be in a trading range for at least a couple of weeks after a buy climax at the bottom of the 15 month range. At a minimum, the odds favor TBTL Ten Bars, Two Legs sideways to up. Less likely, the reversal will test the all-time high, or continue down relentlessly without pausing for more than a few days.
This is the final week of the month. The midpoint of the month’s range is important. At a minimum, the bulls want a close above the midpoint and the bears want a close below the midpoint as a demonstration of strength. The day opens in about 30 minutes, and the Emini is around the midpoint of the month’s range and at the monthly moving average. The monthly chart is still in a bull flag above the moving average. The weekly chart on Friday closed near its high, but the candlestick pattern was a doji and not a strong reversal up from the bottom of the range. Also, it followed 2 big bear bars. The odds are that there will be sellers above last week’s high and the first attempt up will be limited to a bar or two (a week or two).
The daily chart has had 3 days up from support, but none was a big bull bar closing on its high, and the bear channel down was tight. This means that the reversal up is more likely minor, which means that it is probably a leg in what will become a trading range. Whether or not the Emini trades above last week’s high, possibly to the top of the micro wedge around 1940 and the moving average, it is likely that the rally will be followed by a test back down. The bears want the trading range to be a bear flag. The bulls want it to be a 15 month triangle and therefore a bull flag. The daily chart is still Always I Short and the bulls will probably need a major trend reversal if they are to test the all-time high. Even though the location at support is good for the bulls, as is the sell climax, the context is also good for the bears, as is the momentum down. Since the bulls have not yet done enough, the probability still favors a test back down, which might be the start of a breakout below the October 2014 low and the bottom of the 15 month trading range.
With 30 minutes to go before the open, the Emini is down 9 points. The 60 minute chart is slightly overbought and it is beginning to test the lower highs in the January selloff. It could test down any day. The bears will see a double top bear flag and the bulls will look for a major trend reversal up. Whether or not the Emini tests down for a day or two to the 1840 bottom of the 1st pullback this week, the odds still favor a test up to near the top of the 60 minute wedge bottom at around 1940 at some point within the next 2 weeks.
Forex: Best trading strategies
The EURUSD has been in an 8 week tight trading range within a 10 month trading range. Although the 60 minute chart has rallied for about 15 hours, the rally is just a leg within the trading range, and the daily and weekly chart remain in breakout mode. Day traders will BLSHS, Buy Low, Sell High, and scalp. The range is tight, and most scalpers are taking 10 pips profit. Many are entering with limit orders, selling above prior minor highs and buying below minor lows. Some are scaling in and using wide stops. Until there is a strong breakout with follow-through on the 5 and 60 minute charts, day traders will continue to scalp.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
As I expected after an overdone bear rally and a trading range on Friday, today was a trading range day for the 1st half (I left early). Just like the Emini was likely to pull back today or tomorrow, and it did, it is also likely to go above last week’s high this week or next, and it will probably be in a trading range for a couple of weeks.
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.