In the first minute of the Emini, there was a gap up to an all time high. It traded above the September high by 1 tick, which was the all-time high. This created an outside month on the monthly chart, and the candle closes today. The big gap up was met by immediate selling, as expected.
The market is extremely overbought and this is the 13th day of a bull microchannel. Bulls will use this test of the prior high to take profits. There were 4 consecutive bear bars on the open, making the day always in short.
At the moment, there is a 50% chance this will remain the high of the day. However, if the bulls can prevent too much follow-through selling, they will try to rally the market at the end of the day to close above the September high at an all time high.
When there is a big gap up, there often is a pullback for 10 – 20 bars. Once the market gets closer to the moving average, the bulls buy aggressively, hoping to create an opening reversal at support for the low of the day. However, because of the context (very overbought and testing the prior high), there is at least a 50% chance that the bulls will fail and their rally will create a lower high major trend reversal. Unless the bulls create a strong reversal with consecutive, strong bull bars, the bears will remain in control and will sell rallies. Because the daily chart is so overbought, today could become a big bear trend day. If so, it probably will do so in the form of a channel.
If the bulls are able to create a strong reversal up, today could become a very big bull trend day. The bear case is stronger at the moment, but big gap up days usually need 1 – 2 hours to decide on the trend.
Day trading outlook for tomorrow’s Emini price action
The Emini reversed down from the all-time high on the first bar of the day, but the bears were unable to create more than a trading range. They gave up at the end of the day and the bulls made another attempt to close the market at an all-time high.
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.