The Emini opened around yesterday’s close and traded sideways with big bars and prominent tails. This is trading range price action. Although today is probably not going to be a bull trend day, it still might be a bear trend day. However, after such a strong 2 day rally, a trading range day is more likely.
With yesterday’s range as big as it was, the legs today could be big. After a 10 bar bull micro channel, there is a 90% chance of at least a one bar pullback on the 60 minute chart.
At the moment, the Emini has reversed down from above yesterday’s high and is Always In Short. The fight right now is over whether today will be a bear trend day or a trading range day. The bear reversal lacked consecutive big bear trend bars. This makes either a trading range or a weak bear trend more likely than a strong bear trend. A weak bear trend is either a broad bear channel or a trending trading range day. In both cases, there is a lot of 2 sided trading, and the bulls will usually have at least one swing up.
The bulls want an opening reversal at the moving average. They need to do much more to make traders think that there will be a bull trend within the next few hours.
Futures trading strategies after a buy climax
S&P 500 Emini: Pre-Open Market Analysis
Today is the last day of the month. As a result, monthly support and resistance are important, especially at the end of the day. One important target is the open of the month at 2076.50. The bulls want June to have a bull trend bar as its candlestick pattern. They therefore need a close above the open of the month. Another target is last month’s high of 2092.50.
Yesterday was a buy climax. Hence, there is a 50% chance of follow-through buying in the 1st hour. Yet, there is only a 25% chance of a strong bull trend day. After 3 climactic days, there is more than a 75% chance of at least 2 hours of sideways to down trading, starting in the 1st 2 hours. The ranges and swings have been big this week. Consequently, day traders need to be prepared for big moves, even if today is mostly a trading range day.
Buy climaxes on 5 minute and 60 minute charts
Yesterday’s gap up might be a measuring gap. The target is around 2077. However, the 60 minute chart is in a 10 bar bull micro channel. That is unusual and therefore unsustainable and climactic. While today would continue up in the micro channel, there is a 90% chance of at least a 1 bar pullback on the 60 minute chart today.
The 5 minute chart finished with a strong rally yesterday. It was the strongest rally of the entire day. Hence, it was more likely an exhaustive buy climax. There is a 60% chance that today will trade below the low of that final leg up. It began at 2060.25. Once there, a trading range is likely to form.
Forex: Best trading strategies
Yesterday was the 3rd consecutive bull day after Friday’s sell climax. Today rallied to a new high, but reversed down. It therefore so far has a bear body. As I have said several times, the USDJPY and the EURJPY have a 60% chance of a reversal up for the next couple of months. As a result of the size of last week’s bear breakout, they might have one more new low first.
Trading range price action
The bears see the 4 day rally as a bear flag. Friday’s bear breakout was strong enough to have at least a small 2nd leg down. The overnight rally in the EURUSD Forex market broke above the June 16 low, yet reversed down strongly. That is the breakout point. The bulls wanted to close the gap, but they were disappointed by the reversal. The bears were disappointed by a rally above the breakout point. Disappointment is a hallmark of a trading range. A weak rally is another. Closing the gap after a sell climax is a third. The odds are that the EURUSD Forex chart will be mostly sideways for 1 – 4 weeks.
When the daily chart is in a tight trading range, the 5 minute chart is mostly in trading ranges. The overnight Big Up Big Down candlestick pattern is trading range price action. Since the range was 70 pips, online day traders will try to scalp for 20 pips. However, this range will probably shrink and they will mostly scalp for 10 pips today. As always, if there is a strong breakout up or down, day traders will swing trade. While that is always possible, trading range scalping is more likely today.
3 day bear flag
The bears do not want the EURUSD Forex chart to rally above breakout points. They want the gaps to stay open. The see that the 3 day rally was weak. They want it to be a bear flag. As a result, they want a bear breakout and another leg down. While the bears will probably get the bear breakout below a bar in the bear flag, there is a 50% chance that there will be buyers instead of sellers below. If Friday’s sell climax was the end of the trend and the start of a trading range, bulls will start to buy below the low of the prior day. We should find out over the next week.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After a 14 bar bull micro channel on the 60 minute chart, the odds were that there would be an early pullback. Instead, after going sideways for an hour, today was another strong bull trend day. Yet, the rally is still a buy climax. Therefore, tomorrow will probably have a pullback on the 60 minute chart.
Furthermore, it will probably be mostly in a trading range. Strong bull trends do not usually reverse into bear trends. They much more often evolve into trading ranges. After a trading range, then the bears have a better chance of creating a reversal.
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.