Posted 7:02 a.m.
The Emini opened with a trend from the open bear trend, reversing down from a new all-time high, double top, and expanding triangle on the daily chart. The initial selling was so strong that the odds of an opening reversal and bull trend day are low. Today will probably be either a bear trend day or a trading range day. Since the past 3 days were trading range days and because protracted bull microchannels are usually followed by tight trading ranges, the odds are that today will have a lot of trading range price action.
At the moment, it is always in short, but it is testing the September high and will probably bounce. The bulls want an opening reversal and low of the day. The bears want the bounce to become a lower high major trend reversal. Until the bulls create a strong reversal up, the bears will be in control and will sell rallies.
Day trading outlook for tomorrow’s Emini price action
The Emini gapped up and tested above the all-time high and then reversed down strongly. However, the selloff looked like a bear leg in a trading range, and the day became a trading range day.
The Emini had a 14 day bull microchannel and yesterday was the first breakout below that microchannel. The odds were high that the bear breakout would be bought, and it was. The market usually trades up for 1 – 3 days and then begins a correction for about TBTL, or ten bars and two legs. At that point, it decides between trend resumption up and trend reversal down. This means that the odds favor limited upside over the next few days and that the Emini will be then sideways to down for the next couple of weeks.
Because of this, traders will sell above highs, like today’s high, looking for swings down. They will also buy below lows, like today’s low, betting that the downside will also be limited. Finally, they will be quick to take profits. When traders buy low, sell high, and scalp, a trading range forms, and that is likely on the daily chart.
The 14 day microchannel is a sign of extreme buying pressure. This can result is a strong, tight bull channel for the next many weeks, but this is unlikely. The 14 days without a pullback is also extreme and probably unsustainable, and therefore a buy climax. It is a buy vacuum test of the September high and a climax usually needs a pause, like a 10 day tight trading range, before the bulls will buy aggressively again.
Because it is a climax, it can lead to a reversal. In the absence of selling pressure over the past 3 weeks, the odds of a sharp selloff are small. However, if the Emini does go sideways for a couple of weeks, it can develop enough selling pressure to create a selloff.
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.
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 Emini price action real-time throughout the day in the BrooksPriceAction.com trading room, and a 2 day free trial is available.
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.
Hey Mike,
I might be speaking “out of school” here but like you are a student and wanted to share my thoughts that might help. From my understanding, one generally only STC on bear bars that are below the EMA. Also in TR’s, one sells in the upper half/near the top of the range. Maybe we were not high enough in the range yet. After all, TR’s go beyond support & resistance.
The key is to look to the left. Most of the price action today was of a trading range…BLSHS (buy low, sell high, scalp). I talked about this in the room. The selloff was likely just a sell vacuum test of the 7:50 low, and as long as it held above that low, the bull were probably still in control. 57 was the second reversal up from a 2nd leg down in a trading range, so it was more likely the start of an up leg than a pullback in a down leg.
OK, great that helps, Thank You
AL, Where did i go wrong in thinking to sell the close of bar 57 ? with
it touching the MA and it came about half way up on bar 50. Bar 55,56
had tails on the top which had me think that 57 was a false breakout,
and we were in a trading range. Any thoughts would be helpful. Thank You