Emini holiday trading before budget vote and possible government shutdown
Updated 6:44 a.m.
The Emini reversed down from above yesterday’s high on the open. Since yesterday was a small day, there is an increased chance of an outside down day today. However, by trading above yesterday’s high, the bulls atriggered a buy signal on the daily chart. The bulls bought a 2 bar pullback on the open. Then, the Emini reversed up from the moving average. This is an Opening Reversal and a possible low of the day. However, the buy signal bar was small and the entry bar was not a big bull trend bar. Consequently, the Emini is still deciding if it will be a trend day, or a 7th day in a tight trading range.
Until there is consecutive strong trend bars up or down, the odds favor a continuation of the tight trading range. At the moment, the Emini is Always In Long. However, it is not yet strongly bullish.
Pre-Open market analysis
The Emini has been in a tight trading range for 6 days. Since the daily chart is in a bull trend, the odds favor at least slightly higher prices. However, because the higher time frames are climactic, the odds are against much higher prices without a 5% pullback 1st.
This is the quietest week of the year. Most of the time, the Emini will probably be in tight trading ranges. However, there will be some breakouts that have follow-through. Swing traders will wait for the breakouts. Scalpers will trade with limit orders until there is a strong breakout. They then will be able to enter with stops when there are pullbacks.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. Yesterday was the 1st bull day in 5 days. Since the 6 day pullback is a bull flag on the daily chart, yesterday was a buy signal bar. The odds are that today will trade above yesterday’s high and trigger the buy signal.
While Christmas week typically spends most of its time in tight trading ranges, a small day like yesterday often leads to a big day. Therefore, today has an increased chance of being a strong bull trend day. If the bulls get an early rally, traders should look to swing trade at least part of their position. A bear trend day is less likely.
Because the Emini has been in a tight range for 6 days and this week is often quiet, most likely today will be another small day. Traders should watch the early bars to see if they are mostly big trend bars or small sideways dojis. That is often a sign of what will follow.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart began a 3rd leg up in its rally from the December 12 double bottom with the November 21 low. The momentum up is strong enough to test the November 27 high within a week. However, a reversal down will be a wedge top.
The EURUSD daily Forex chart has been in a wedge bull channel since reversing up from a double bottom bull flag. It will probably test near the November 27 high. A reversal down from above last week’s high would create a wedge top. It would therefore probably lead to a bear leg in the November-December trading range.
The bulls want a strong breakout above the 2 month trading range. They hope that the momentum will be strong enough to break above the September 8 high. That is the top of the 3 year trading range. The momentum up on the monthly chart in 2017 has been strong enough to make a test of the September high likely within a month or so.
However, this year long rally is still a pullback from a breakout below the bottom of a 10 year trading range. The bulls need the rally to continue for at least another 500 pips before traders will conclude that the 2014 breakout below the 10 year range failed.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has rallied 40 pips overnight. While there is no sign of a top, the rally is weak. In addition, it is now within 4 pips of last week’s high. The odds favor a move above that high. Yet, unless the rally gains momentum, it will probably stall around here or 50 pips higher around the November high.
Because the rally is not covering a lot of pips and it is now at resistance, the odds are that it will evolve into a trading range this morning. The bulls want it to accelerate above last week’s high. If it does, it will probably stall around 1.1950, which is the November high.
Since the daily chart is bullish, it is easier for day traders to make money buying pullbacks than selling rallies. However, because the legs up are small, day traders are buying dips and scalping out above prior highs on the 5 minute chart. The overnight dips have not been big enough for bear scalpers. However, the odds are that the weak overnight rally will begin to enter a trading range today. That would allow bear scalpers to make money as well.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today reversed down from above yesterday’s high and then broke below yesterday’s low. It was therefore an outside down day.
The Emini formed an outside down bar yesterday. Since it was the 7th day in a tight trading range on the daily chart and it was not a huge bear day, it did not significantly increase the odds of a correction. The strong reversal up at the end of the day make an early rally likely tomorrow.
However, because today had a bear body, there is an increased chance of a gap down tomorrow. If the bears create a gap and keep it open, it would create a 2 week island top on the daily chart. That will make traders more willing to swing shorts if tomorrow then begins to sell off.
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.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
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.
