Emini weak High 1 bull flag at 2800 triple top
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a trading range day. On the daily chart, it is a High 1 bull flag and therefore a buy signal bar. Every pullback this year ended after 1 or 2 bars. The bulls hope the bull trend will resume today.
However, the Emini is at strong resistance at 2800 and the triple top on the daily chart. In addition, yesterday was a doji day and not a strong bull trend day. Furthermore, there is a parabolic wedge buy climax.
Monday might be the start of 2 – 3 weeks of profit taking. Consequently, yesterday is not a strong buy setup. There may be sellers above yesterday’s high and above Monday’s high.
How will traders know that a pullback is underway? They will begin to see 2 or more especially big bear bars closing on their lows on the 5 minute chart. In addition, there will be bear trends. Also, there will often be selling in the final 30 minutes.
Finally, the pullback on the daily chart will last 3 or more days. Until then, traders will assume that the 2 month Small Pullback Bull Trend is still in effect.
Overnight Emini Globex trading
The Emini is down 4 points in the Globex session. Since yesterday was a doji bar on the daily chart, it was neutral. Consequently, there will probably be buyers around its low and sellers around its high.
The bears see yesterday as the entry bar for the selloff from resistance above 2800. A doji bar is a weak entry. When that is the case, the bears usually need a micro double top. Therefore, there will probably be a test up this week.
Furthermore, the open of the week is important this week. After 9 bull weeks on the weekly chart, the bulls will try for a 10th. That is another reason for a test up to 2808 today or tomorrow.
Because the 2 day selloff has been weak, the daily chart is in a strong bull trend, and the open of the week is a magnet above, the odds favor sideways to up for at least a day or two.
Wedge bear flag in middle of 4 month trading range
The EURUSD daily Forex chart is back to the middle of its 4 month trading range. Legs up and down have lasted 2 – 3 weeks. This leg will probably end soon.
The February selloff was unusually strong. When that is the case, the bear low typically gets tested. Consequently, the daily chart will probably begin retrace at least half of the 3 week rally within a week.
While the February selloff was strong, so were many of the rallies over the past 4 months. Trading ranges always have legs that look like they will begin a trend. But, a hallmark of a trading range is disappointment.
When traders see strong legs repeatedly reversing, they correctly conclude that reversals are more likely than breakouts. As a result, they exit trades within 2 – 3 weeks and look for a trade in the opposite direction. That will probably happen within the next few days.
The daily chart is in Breakout Mode. It is waiting for information from Brexit. Once the future is clear, there will be a trend up or down. A reasonable goal is a 300 – 400 pip measured move based on the height of the 4 month range.
The breakout can be up or down. Finally, there is a 50% chance that the 1st breakout will reverse and there would then be an opposite breakout.
Overnight EURUSD Forex trading
The 3 week rally has had 3 legs up. It is therefore a wedge bull channel. A wedge bull channel typically breaks to the downside and sells off for a couple legs. The swing down will probably begin this week.
There is a 40% chance of a bull breakout above a wedge bear flag. That then usually leads to a couple legs up. A measured move up from here is at the top of the 4 month range.
The 5 minute chart has been in a 30 pip range overnight after yesterday’s bull breakout. The odds are that the daily chart will start to turn down within a few days. Consequently, day traders will continue to scalp, but look for a downside breakout. Once they see it, they will swing trade. In addition, they will be more willing to sell rallies than buy dips for a week or two.
Less likely, the bulls will get the upside breakout. If so, day traders will be more eager to buy dips than sell rallies.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini sold off in a sell climax on the open. It reversed up from a wedge bottom. However, it stalled near the 60 minute EMA and last week’s high. The open of the week is an important magnet above. Therefore, the Emini will probably test it tomorrow or Friday.
Today was the 2nd day in a pullback on the daily chart. It is therefore a buy signal bar for tomorrow for a High 1 bull flag. But, the weekly buy climax is extreme and Monday was a strong sell signal bar. There will probably be sellers around Monday’s high.
Tomorrow is the last day of February. No matter what tomorrow does, February will probably be a bull bar closing near its high on the monthly chart.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.