Emini trading range before FOMC Fed interest rate hike
While the Emini sold off on the open and is Always In Short, the bulls bought after 4 bars. This is more likely a bear leg in a trading range than the start of a strong bear trend day. The 60 minute moving average is around yesterday’s low. That is therefore a support area. Unless the bears break strongly below the 60 minute moving average, the Emini will probably begin to go sideways and form a trading range open.
The bulls are hoping for an early bear trap that forms the low of the day. Because of the early selling, the bulls will need a strong reversal up, or at least a small double bottom, before traders will believe that they have taken control.
Pre-Open Market Analysis
After Thursday’s and Friday’s double bottom just above the August high, the Emini rallied strongly yesterday on the open. Yet, the rally sold off from a parabolic wedge and the day was a trading range day. The selloff was not as strong as the rally. In addition, the bulls kept the gap open. Yet, because the rally was weak and within a 2 week trading range, there is an increased risk of a gap down this week. As a result, the Emini would form an island top.
Gaps are common in trading ranges. Hence, a gap up like today or a gap down later do not add information. The Emini has been sideways for 9 days. It is therefore likely to remain sideways tomorrow. In addition, it might stay in a tight range until the December 14 FOMC Fed rate hike announcement.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. Yesterday’s gap up and early rally were strong. The odds are that would therefore be at least a small 2nd leg up. Yet, the Emini is still within its 10 day tight trading range. Furthermore, next week’s FOMC meeting will tend to make traders take quick profits. As a result, until the report, the Emini will probably be unable to create strong trend days. Therefore, there will continue to be a lot of trading range and limit order trading.
Until there is a strong breakout with strong follow-through, the odds are that the 2 week tight trading range will continue. Hence, the Emini is probably going to be neutral going into next week’s likely Fed interest rate hike.
EURUSD Forex Market Trading Strategies
The 240 minute EURUSD chart rallied yesterday after a lower low major trend reversal. In addition, it formed at the major support of the December 2015 low. As a result of the strong momentum up yesterday and the market being at support, the odds favor higher prices this week. Yet, because the chart has been sideways for 18 months, any rally will be a leg in the trading range, just as the November selloff was. Traders will therefore continue to buy low, sell high and take quick profits.
Overnight EURUSD Forex trading
Yesterday reversed up from a Lower Low Major Trend Reversal. The bottom was also an Expanding Triangle. After breaking above the 12 day trading range, the bears are trying to reverse the EURUSD back down from an Expanding Triangle bear flag. Yet, yesterday’s reversal up was strong.
Furthermore, it came from just below major support. A 2nd leg up is more likely over the next week. Therefore, traders will buy the selloff that began last week. Because the yesterday’s rally was almost 300 pips, a 50% pullback would be 150 pips. While that is unlikely, bulls will remain bullish unless a reversal down falls 20 or more pips below that.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied in a fairly tight channel all day. Yet, there were prominent tails and many overlapping bars. Furthermore, the range was small. While it was a bull trend day, it was a weak trend.
A bull channel is a bear flag. Therefore, in general, there is only a 25% chance of a successful strong bull breakout. While today finished with a strong bull breakout above the bull channel, the bulls need follow-through buying. The size of the breakout was enough to reduce the chances of a reversal down. At the close, there is probably a 50% chance of a successful breakout and measured move up tomorrow. Yet, there is still a 50% chance of at least a couple hours of sideways to down trading.
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.