Emini weak follow-through buying after breakout above 2825 resistance
I will update again at the end of the day.
Pre-Open market analysis
The Emini broke above last week’s high. That was the minimum objective for the bulls after a strong bull reversal last week. Despite being sideways all day, the day closed on its high. This is good for the bulls, and increases the chance of at least slightly higher prices today.
The Emini began the week almost exactly at the midpoint between the March 8 low and the all-time high. The momentum up favors a test of the all-time high.
But, the 3 month buy climax and the 16 month trading range are more important. As a result, the next 120 points could very well be down.
The break above the October high could continue for another 2 weeks before there is a reversal down. Furthermore, if the bulls get a couple consecutive bull bars closing near their highs, the probability of a new all-time high within a month or two will increase significantly.
Even if they get it, most trading range breakouts fail. Therefore, there will probably be more sellers there than buyers above the all-time high. This is because it is also the top of a 16 month trading range. The bears would look to sell a reversal down from a big expanding triangle on the weekly and monthly charts.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It will therefore probably gap above yesterday’s high. This would be the 3rd gap up in the 8 day rally. That is a sign of strong bulls.
However, it is coming late in a 3 month strong bull trend. It therefore might also represent an exhaustion move. This is especially true after breaking above the 2825 major resistance. This increases the chance of a swing down on the daily chart.
But, when a rally is as strong as this 8 day rally has been, it usually has to transition into a trading range before a swing down can begin. Consequently, the bulls will probably buy the 1st 1 – 2 day selloff.
Most recent days have spent a lot of time within trading ranges. They also tended to close near their highs. Since markets have inertia, traders should always expect a continuation of what has been going on.
Despite the trading range price action, the legs up and down have been big enough for day traders to swing trade. The odds are that this will continue today. With tomorrow’s FOMC announcement being a potential catalyst, there is less chance of a big trend day today.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has rallied for 3 weeks. Today’s high so far is withing a few pips of the bear trend line that began with the January 10 high.
More importantly, it is only 58 pips below the February 28 lower high. As long as the chart continues to make lower highs, it is in a bear trend. If the bulls can break above that 1.1420 lower high, the bear trend will have ended.
When a bear trend ends, the chart is in a trading range and sometimes in a bull trend. There have been many strong rallies and selloffs over the past 4 months. Each was strong enough to be the start of at trend. However, during each, I always said that a leg in the trading range was more likely than the start of a trend.
That is still true. Until there are consecutive closes above or below the 4 month range, every strong rally or selloff is more likely to reverse than begin a trend.
Still in trading range so expect reversals
Every rally or selloff over the past 4 months has reversed within about 3 weeks. This current rally has lasted 8 days and it is now near resistance. The odds are it will reverse.
But, in trading ranges, reversals often occur after going beyond support or resistance. Consequently, the reversal will probably take place only after the rally goes above the bear trend line or the February 28 lower high.
Because the daily chart has a wedge bottom, the bulls will buy a selloff that retraces above half of the 2 week rally. The odds favor a 2nd leg up on the daily chart after a 1 – 2 week selloff to a higher low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart continued yesterday’s weak rally. There is now a small double top on the 5 minute chart just below the bear trend line on the daily chart.
This is also the 3rd push up on the 60 minute chart. Consequently, the rally is a buy climax at resistance.
But, the daily chart is in a trading range. When a rally is very close to resistance, it usually goes beyond the resistance before reversing. Therefore, the 5 minute chart will probably get above the bear trend line this week before trading down for a week or so. It might even have to go above the February 28 lower high as well.
Because the 5 minute chart has been in a 30 pip range for the past 6 hours, day traders have been scalping. However, since the rally is near resistance on the daily chart, traders expect a 100 pip selloff to begin within a week. They therefore will begin to look for swing trades from a reversal down. But, they 1st need to see bigger bars and bigger legs on the 5 minute chart. Until then, they will continue to scalp.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
End of day summary
The Emini broke above an early trading range, but the breakout reversed down from an expanding triangle top. Despite a big midday bounce, the selloff continued down to the 60 minute EMA.
Tomorrow also has an 11 am PST FOMC announcement. That is a potential major catalyst. Day traders should exit positions ahead of the report. They should wait for at least 10 minutes after the report before looking to trade again.
The daily chart is in an 8 bar bull micro channel. That is a buy climax late in a 3 month rally. Since today closed near its low, it is a sell signal bar for tomorrow. The odds are that tomorrow will trade below today’s low. Furthermore, the Emini might begin pulling back to the March 8 low tomorrow or within a week.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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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.
