Today began with a trading range open after briefly testing above yesterday’s high, which is the all-time high. It is also following 4 trading range days, and this increased the chances that today will again have mostly trading range price action. Yesterday’s range was small so today could become an outside down day.
The bears are currently in control, but the bulls see this early selloff as a wedge bull flag. If they are unable to get the reversal up, the bears will get a bear breakout below the bottom of the wedge bull flag and then probably get a measured move down to below yesterday’s low.
As always, if there is a strong breakout up or down, especially if there is follow-through, traders will take swing trades in that direction. Until then, they will continue to trade this like a trading range, buying low, selling high, betting breakouts will reverse, and scalping.
Today is the 2nd day up after the pullback below the bull microchannel on the daily chart. The rally that follows the pullback typically only lasts for a few days, and then the Emini usually enters a trading range for 10 bars or so. That trading range can start today or very soon. Traders will look to sell rallies, expecting the bull channel of the past 3 weeks to evolve into a trading range.
Day trading outlook for tomorrow’s Emini price action
The Emini reversed up strongly today and then had a weak bull channel for the rest of the day. It closed at a new all-time high, and at the top of the 5 minute channel. Even though the rally has been much weaker this week, all higher time frames are in strong bull trends and there is no sign of a top yet. Trends always look like they are about to reverse, but most reversals become pullbacks. The monthly chart is the most bullish, and even if the daily chart has another 200 point selloff, like last month, it would simply be part of a pullback on the monthly chart. The stock market probably will need many months to create a credible top, and there is none yet.
Because the 60 minute and daily charts are so overbought, they might have a 20 – 50 point pullback at any time, but there is no topping pattern yet on either. Without a clear top, a reversal can begin with a big bear breakout. If we get that, we will easily see it.
The monthly unemployment report comes out before the open tomorrow and could lead to a big gap up or down. If there is a big gap up, it would be in a very overbought market at the top of the 60 minute channel. It would be more likely to reverse down than continue up. If there is a big gap down, if could be the start of a 60 minute pullback. However, this would probably form moving average gap bars (bars with highs below the 60 minute moving average). With the bull trend as strong as it is, bulls will probably buy it. Remember, moving average gap bars late in a trend often lead to the final leg before a major trend reversal forms. This means that traders will look for reasons to sell the rally, if there is a rally.
Tomorrow is a Friday and the market will pay attention to weekly support and resistance. The September high was 2012.75, last week’s high was one tick above that, and the open of the week was 3 ticks above that, at 2013.75.
The daily chart had been in a 14 day bull microchannel until it pulled back on Tuesday. The Emini usually rallies for a few days and then goes sideways for about 10 bars. Tomorrow is the third day up and it might be the start of a small trading range. However, the stock market is up 90% of the time from November 11 to December 5, and this will tend to limit the downside.
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.