The Emini opened with a tight trading range in an overbought bull trend. It is within yesterday’s tight trading range and within the tight trading range of the past 6 days. This is a limit order market. Bulls are buying below bars and scaling in lower, bears are selling above and scaling in higher, and both are scalping.
At the moment, it is always in long and trying for a breakout above yesterday’s and last week’s high.
There should still be at least one swing trade today, but when there is so much two sided trading, most traders will scalp most or all of their trades until the Emini clearly trends up or down. If there is a strong breakout entirely above or below the 6 day tight trading range, and there is also strong follow-through, traders will hold for swing trades. Until then, they will look to buy low, sell high, and scalp. If there is a strong move and they are looking for a reversal, they will wait for a second entry or a breakout before entering. They will then scalp for 1 or 2 points.
Today is the first day of the week and therefore there might be a brief sharp move up or down that is followed by several days in the opposite direction. Because the stock market is so overbought on all higher time frames, day traders have to be prepared for a move down to support.
Here are my thoughts before today’s open. The Emini has been in a tight trading range, as I thought it would be after the bear breakout below the bull microchannel on November 4. I have mentioned this several times in the past few weeks, and I talked about microchannels occurring late in trends usually being exhaustive climaxes.
The near-term target for the bears is a test of the November 4 low, which was the pullback below the microchannel and a test of the October 30 gap. The bears want a breakout below and a measured move down. The bulls want a double bottom with that low and then a measured move up.
Day trading outlook for tomorrow’s Emini price action
Today was the 6th day in a tight trading range and traders should assume that every day will be a tight trading range until there is a strong breakout up or down with follow-through. The bulls want to get above the all-time high, which formed Thursday, and the bears want to test the October 31 gap again, which is the November 4 low.
The Emini is exhausted from the huge reversal in October. Traders are waiting to see if the bull trend resumes or reverses. The Emini is so overbought on higher time frames that the upside is probably limited. However, it is so strongly bullish that the downside is limited as well. I think that the market might remain in a large trading range for many more months, which is has been in since March.
It obviously is also in a bull trend and it might continue to work higher, but because it is so overbought, it probably has to go sideways for many more months before it can go much higher, if it is going to go much higher over the next year.
Premarket price action analysis
See yesterday’s intraday market update report for today’s premarket analysis. Once there, scroll down to the heading, Day trading outlook for tomorrow’s Emini price action.
See the weekly update for a discussion of the weekly chart and for what to expect going into next week.