Posted 7:04 a.m.

The Emini began with a trend from the open bull trend. However, it might be forming a parabolic wedge top near last week’s high. If there is a strong sell signal bar after the 3rd push up, swing bears will sell. Bears wanting a higher probability short will wait for a strong bear reversal or several consecutive bear bars.

Bulls are hoping that the Emini rallies strongly above last week’s high. However, there were 2 strong bull breakouts in the 1st 4 bars, and both had bad follow-through. Yesterday had 2 strong rallies followed by deep pullbacks. This reduces the chances of a strong bull trend day and it increases the chances that this early rally is a bull leg in what might become a trading range. Also, traders need to be aware of a possible parabolic top and early high of the day.

At the moment, the Emini is Always In Long, but this rally looks more like a bull leg in a trading range, and traders need to watch for a possible reversal down from a parabolic wedge top for a swing trade down. However, there is no top yet, and the rally might continue all day, although a trading range is likely soon.

My thoughts before the open: Learn how to swing trade when there is a magnet just above

Although the Emini reversed up strongly on the FOMC report yesterday, the follow-through price action was disappointing, as expected, since the Emini is in a very tight trading range on the weekly chart. It is up a little in the Globex session, and it is getting close to last week’s high of 2106.75. The odds are that it will try to get above last week’s high today or tomorrow, which would turn the weekly candlestick pattern into an outside bar.

However, this is meaningless in a tight trading range. I does greatly weaken the bear argument that the past month is a bear breakout from a wedge top. Instead, it means that the tight trading range traders have won and that the bear breakout appears to be failing, just like last month’s bull breakout. When a market is in a tight trading range, it is in breakout mode, but most breakout attempts fail. Eventually one will succeed.

Because last week’s high is a magnet and there was a bull reversal yesterday, the day trading tip is to realize that the odds favor an attempt at a bull trend today or tomorrow. However, whenever there is a high probability trading strategy, traders learning how to trade the markets always have to be aware that the exact opposite can happen, especially when the Emini is in a tight trading range on higher time frames. Although traders will be looking for a measured move up from yesterday’s strong reversal, they will always be prepared to implement a futures trading strategy for a reversal down and a measured move down. In any case, the moves up and down yesterday were big enough so that the odds favor at least a couple of swing trades today.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

The Emini had a trend from the open bull trend, and then a Final Bull Flag Reversal, which was followed by a trading range.

Tomorrow is Friday and this week is an outside bar on the weekly chart. Weekly support and resistance will be magnets tomorrow, especially in the final hour. The Emini is close enough to the all time high and all time high close so that it might be able to rally above them. The bears want the lower high major trend reversal of the final hour today to lead to a bear trend tomorrow, but the odds favor the bulls.

Best Forex trading strategies

Traders learning how to trade the markets can see that the dollar was weak overnight, especially against the Australian and Canadian Dollars and the Yen. The 60 minute chart of the USDJPY is testing last week’s low for a possible double bottom, but the selling was so strong that the bulls will need a base of 5 – 10 bars. Bears will sell rallies for scalps or swings. The USDCAD and AUDUSD are trying for breakouts, but the 60 minute trend is so strong that traders will look to enter on pullbacks, betting that the best that reversal traders will get is a trading range.

As I am writing, there was a climactic reversal in the dollar on the 5 minute charts, but the dollar weakness overnight was enough to make the climax more likely to be followed by a trading range than a trend reversal. Online daytraders will still look to buy pullbacks in the AUDUSD, USDJPY, and sell rallies in the USDCAD.

The EURUSD is also in a bull trend, but it has been in a trading range for several hours, and aggressive traders will enter with limit orders for scalps, betting that breakouts in both directions will not get very far.

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, 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.

Hi Al.
Usually you say (also in the trading room) that “there is no sign of top yet” or “there is no sign of bottom yet”. How can I recognize (on the intraday graph and for 5 min time frame ) if the top is a real top and a bottom is a real bottom? For example if I have a good reversal candle on the 15 min time frame (that is 3 good consecutive bear bars on the 5 min. time frame) could I conclude that for it I have a good probability that the top is a real top? Or I must to see also the context on the 60 min time frame? What do you see on the intraday 5 min timeframe graph that it can permit to you to conclude that it is a real top or a real bottom?
Thanks in advance.

Al Brooks says:

June 19, 2015 at 5:14 am

All tops form at resistance, and that is context (all of the bars to the left). A top needs selling pressure in those bars and resistance, like a measured move target or a trend line. The more resistance and the stronger the selling pressure, the higher the probability. Even when everything looks perfect, most trend reversals fail. Until there is a clear reversal, the market is still Always In Long, which means that even the best tops are still less than 50% certain.

A trader can ignore other time frames and just trade one chart. It does not matter if he trades the 5 or 15 min chart.