End of day comments about today’s Emini price action and day trading
The S&P500 Emini gapped above both Friday’s high and last week’s high, but tested back into the gap in the middle of the day. From that point, bull day traders wanted a double bottom and a rally to a new high, creating a bull bar on the daily chart. Bear day traders wanted a measured move down to the 60 minute moving average, after Thursday and Friday’s potential final flag on an overbought 60 minute chart.
The third possibility was for the day to close around the open and create a doji candle on the daily chart. Since most of the price action today has been two-sided, and the open was in the middle third of the trading range, this was the most likely outcome.
S&P500 Emini intraday market update for price action day traders
Time of update 8:32 a.m. PST.
The S&P500 Emini had a gap up on the weekly chart as well as on the daily chart. The gap was to an all-time high today. It tested down for a couple of bars and then reversed up for an opening reversal at support (the gap). Even though the signal bar was weak, it was a possible low of the day. The rally had a few consecutive bull bars, but they were small and were followed by a tight trading range. There were several bear reversal attempts, but the magnets above kept pulling the market up. The magnets include measured move targets, the psychological 2,000 round number, and the tops of 5 and 60 minute channels.
The Emini formed a wedge top at 8:10 a.m., but the channel up was tight. This is not a strong sell setup. However, the rally is also not strong, and the price action will probably evolve into a trading range soon. Although the bears have shorted above highs, and they can short here and scale in higher, there is a small chance that this weak rally could continue all day as a small pullback bull trend day. The math is better if the bears wait for a reasonable bear breakout before shorting, or if they short with limit orders above bars. The bears want the Emini to reverse down below last week’s high and Friday’s high. This would close both gaps and weaken the bull case. It would also be a reversal down from the big, round 2,000 number.
If the Emini reverses down to a new low of the day and the open of the day is in the middle third, the open would become a magnet later in the day. The Emini might rally back there and create a doji candle on the daily chart.
Although the Emini is always in long at the moment, the bull trend is weak and it will likely soon enter a trading range. If it enters a tight trading range, the Emini will enter breakout mode. The bulls will try to create trend resumption up at the end of the day, and the bears will try to create a trend reversal down. If they succeed, the reversal will probably be a major trend reversal.
The bulls will continue to buy, but they appear to be scalping because the follow-through has been weak. The market is always in long, but a trading range is likely soon.
Price action on the S&P500 Emini monthly and weekly candle charts
For more, see the weekly update that I left over the weekend. The price action on the monthly chart is that of a strong bull trend, which will probably limit any sell-off to a few bars (months). However, the monthly Emini has not touched the moving average in over 2 years, and rarely is this many points above the moving average. This means that the S&P500 is extremely overbought. It can get much more so, but it is more likely to soon go sideways to down to the moving average.
Last week closed above the July all-time high. The bulls want a measuring gap, but since the S&P500 Emini is so overbought, this gap will more likely become an exhaustion gap. The weekly and monthly price action is still bullish, but the weekly and daily charts might form a double top because the stock market is so overbought. Although a 100 – 200 point correction would be bearish on the daily chart, it would simply be a pullback on the monthly chart.
The best the bears can reasonably hope to get over the next few months is a trading range that might be about 100 points tall. If there is significant selling pressure, like many big bear trend bars closing near their lows on the daily or weekly charts, that bear breakout could be followed by a second leg down on those charts and a bigger correction.
See the weekly update for a discussion of the weekly chart.