Emini buy climax continuing higher and is ignoring Trump
The Emini gapped above yesterday’s high and immediately sold off again. Many days lately have had early selloffs. Yet, most reversed back up later in the day. Furthermore, the weak follow-through selling today increases the chances of another trading range open. In addition, most days over the past month have had trading range opens and became mostly trading range days. Today’s open is consistent with that of the prior days.
While a strong trend can begin at any time, it is less likely with an open that lacks consecutive strong trend bars. Unless a strong breakout up or down begins, the odds favor another trading range open and mostly a trading range day.
Pre-Open market analysis
Yesterday was an FOMC announcement day. Yet, the Emini was sideways after the report. The Emini is in a strong bull trend on all higher time frames. However, the rally is climactic. Since climaxes can go a long want, the bears still should wait to sell on the daily chart. Yesterday is still a sell signal bar for the parabolic wedge top.
The Emini has been in a tight trading range for 2 days and is therefore in breakout mode.
Overnight Emini Globex trading
The Emini is up 5 points in the Globex market. Since the 2500 Big Round Number is resistance and the Emini is close, it is within its magnetic field. Therefore, the bears might not get a reversal until the Emini reaches this psychological target.
The rally on the 60 minute Globex chart is trying to reverse down from above yesterday’s high. If the bears are successful, that would be an expanding triangle top. The initial target for the bears would then be the bottom of the triangle, which is yesterday’s Globex low.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has been in a strong bull trend for 7 months. Yet, over the past month, every strong bull trend bar led to a pause instead of a series of bull bars. This is trading range price action. Hence, this rally will probably be a bull leg in a trading range when traders look back at it in 6 months.
A wedge top (here, a parabolic wedge) usually corrects down to the bottom of the wedge. Since that is about 400 pips below the high, bears will begin to place shorts and hold for a swing down to around the July 5 low. Incidentally, there is also an expanding triangle top on the 240 minute chart.
Buy climaxes can extend very far and therefore this one could go much further. Yet, it is at resistance and therefore in a sell zone. It broke a little above its 30 month trading range, but did not break back up into the bottom of the 7 year trading range above. This is a good area for swing trading bulls to take profits.
Transitioning into trading range
After an initial reversal down, the bulls will wait at least a couple of weeks before buying again. They want to see how strong a reversal the bears can create. If it is not strong, the bulls will buy again after a couple small legs down over the next 2 weeks.
On the other hand, if the reversal has strong bear bars or a series of strong bear bars, the bulls might wait to buy until the selloff reaches the bottom of the wedge bull channel. Hence, they would buy around 1.1300.
If the bears correct down to that level, the EURUSD daily chart will probably bounce at least 200 pips. At that point, the bull trend will have converted into a trading range. Furthermore, that range could last many months.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart sold off 80 pips in a tight bear channel overnight. If today closes near its low, today will be a strong sell signal bar on the daily chart. Since the overnight channel has been tight, the 1st reversal up today will probably be minor. This means that the best the bulls will probably get today is a 40 pip bull leg in a trading range.
Since the selloff has had bad follow-through after strong bear bars, it will probably soon transition into a trading range. Day traders will scalp. Yet, the context on the daily chart is good for the bears. Consequently, the long-term bulls will begin to sell rallies to take profits. In addition, the bears will sell rallies, looking for a correction down that could last a couple of months.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The bears had a strong selloff today. Today was an outside down day and the 3rd consecutive bear day. In addition, there is a parabolic wedge top of the daily chart. If the bears can get a 2nd strong bear day tomorrow, the daily chart will become Always In Short. If not, today will be just another pullback in the bull trend.
Since the bulls got a strong reversal up in the final 3 hours, the bear bar on the daily chart is much more neutral. The big reversal creates confusion, which makes sideways likely for several days.
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.