There is a buy climax on the daily chart, but there is no clear sell signal yet. The Emini had a trading range open and it is likely to enter a tight trading range on the daily chart after such a climactic bull microchannel. However, there will still probably be at least one swing today. Although this is a limit order open, the odds favor a breakout up or down at some point within the first hour or two, and the odds are high that there will be follow-through. Traders should wait for that breakout, or for a strong buy or sell setup within the developing tight trading range.
Since the daily chart will probably transition into a tight trading range, there probably will be bears who will be looking to short above the prior bar on the daily chart. This will probably limit the upside for a week or two.
Day trading outlook for tomorrow’s Emini price action
After breaking out to an all-time high, the Emini entered a tight trading range. The bulls want trend resumption up tomorrow and the bears want a trend reversal down.
The Emini is very overbought, but it is getting close to the top of the channel above, which is about 15 points above today’s high. This is a magnet and it might pull the market there. If so, there might be a breakout for a few days before a reversal down. It does not matter how overbought the Emini is on the higher time frames because it could become much more overbought.
Until it creates a credible top, like a major trend reversal, or breaks strongly to the downside, the downside will be limited. The best the bears can reasonably hope for is a pullback for a week or two, like testing that gap below 2000 again. If they get that, it might contain enough big bear bars to qualify as significant pressure. This could then lead to a bigger selloff. Until then, traders will continue to buy pullbacks.
Premarket price action analysis
See yesterday’s intraday market update report for today’s premarket analysis. Once there, scroll down to the heading, Day trading outlook for tomorrow’s Emini price action.
See the weekly update for a discussion of the weekly chart and for what to expect going into next week.