The Emini opened with a trend from the open bear trend, reversing down from a new all-time high, double top, and expanding triangle on the daily chart. The initial selling was so strong that the odds of an opening reversal and bull trend day are low. Today will probably be either a bear trend day or a trading range day. Since the past 3 days were trading range days and because protracted bull microchannels are usually followed by tight trading ranges, the odds are that today will have a lot of trading range price action.
At the moment, it is always in short, but it is testing the September high and will probably bounce. The bulls want an opening reversal and low of the day. The bears want the bounce to become a lower high major trend reversal. Until the bulls create a strong reversal up, the bears will be in control and will sell rallies.
Day trading outlook for tomorrow’s Emini price action
The Emini had a 14 day bull microchannel and yesterday was the first breakout below that microchannel. The odds were high that the bear breakout would be bought, and it was. The market usually trades up for 1 – 3 days and then begins a correction for about TBTL, or ten bars and two legs. At that point, it decides between trend resumption up and trend reversal down. This means that the odds favor limited upside over the next few days and that the Emini will be then sideways to down for the next couple of weeks.
Because of this, traders will sell above highs, like today’s high, looking for swings down. They will also buy below lows, like today’s low, betting that the downside will also be limited. Finally, they will be quick to take profits. When traders buy low, sell high, and scalp, a trading range forms, and that is likely on the daily chart.
The 14 day microchannel is a sign of extreme buying pressure. This can result is a strong, tight bull channel for the next many weeks, but this is unlikely. The 14 days without a pullback is also extreme and probably unsustainable, and therefore a buy climax. It is a buy vacuum test of the September high and a climax usually needs a pause, like a 10 day tight trading range, before the bulls will buy aggressively again.
Because it is a climax, it can lead to a reversal. In the absence of selling pressure over the past 3 weeks, the odds of a sharp selloff are small. However, if the Emini does go sideways for a couple of weeks, it can develop enough selling pressure to create a selloff.
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.