The day opened with big bars and prominent tails at the 60 minute moving average and within yesterday’s tight trading range. This is trading range trading and it increases the chances that today will be a trading range day.
Until there is a strong breakout up or down with follow-through, traders will be quick to take profits and will be hesitant to swing trade. Traders learning how to trade the markets should patiently wait for these big bars and big reversal to end before looking to enter.
Currently, the bears see a lower high major trend reversal and the bulls see an opening reversal up from the 60 minute moving average. When both the bulls and bears have credible arguments, the market is in a trading range and in breakout mode. The 3 consecutive bull bars make the market always in long, but the probability is about the same for the bulls and bears at the moment. The market has yet to decide on its initial direction, and once it does, the move will probably be part of a trading range day.
The market looks like it is heading for the midpoint of the week, which is probably the most important magnet on the weekly chart.
Since today is Friday, at the end of the day, the weekly magnets could create a strong swing up or down.
My thoughts before the open: Bear flag or a bull flag
The bears see yesterday’s bull trend reversal as a bear flag in the selloff from the February high. The bulls see the selloff from that high as a big bull flag, and yesterday’s rally as a resumption of the bull trend.
As long as the 60 minute chart continues to make lower highs, the 60 minute chart is in a bear trend. The bulls want to get above the 60 minute lower high at 2075 so that the 60 minute bear trend will have converted into a trading range. The bears want to prevent that from happening. If the market gets there, the bears will try to form a double top.
Today is Friday, so weekly support and resistance is important, like the open, high, midpoint, and low of the week, the weekly moving average, and last week’s close. The market reversed up from the weekly moving average, like it has done many times. However, pullbacks usually become deeper, and this one barely touched the moving average. This increases the chances that the Emini will trade lower at some point soon to test further below the moving average.
Although the weekly candle is now a reversal bar at the moving average, the bar has not yet closed. A selloff today could totally change its appearance. A strong rally would create a strong bull reversal bar and increase the chances of a test of the all-time high.
Yesterday’s reversal was strong enough to make the picture confused and it increases the chances of a 60 minute trading range, which means it increases the chances of a 5 minute trading range day. Yesterday spent 4 hours in a tight trading range and that might be a magnet for trading today.
Summary of today’s price action and what to expect tomorrow
The Emini sold off strongly early on, but did so with consecutive sell climaxes. Once the market got near the low of the week, the selling stopped. This was a possible sell vacuum test of support. The reversal up was the 2nd leg up after the 60 minute wedge bottom.
There is still moving average support just below on the daily and weekly charts so the Emini will probably trade at least a little lower early next week.
See the weekly update for a discussion of the weekly chart and for what to expect going into next week.