Trump year end rally pausing
Updated 6:50 a.m.
Because yesterday was a small day, today will probably either go above yesterday’s high or below yesterday’s low. Today opened with reversals in yesterday’s final tight trading range. While traders see the 2nd bar as a failed test of yesterday’s high, the Emini is still in a tight trading range. The bears therefore need more.
The consecutive bear bars on the open make the Emini Always In Short, but the reversals increase the chances of a trading range open. Hence, the Emini might go sideways for an hour or two before breaking above or below yesterday. This early tight trading range increases the chances of a lot of trading range trading again today. Yet, if there is a strong breakout up or down, traders will swing trade. A trading range day is more likely.
Pre-Open Market Analysis
Yesterday was in a tight trading range at the top of a 6 day trading range. While it is a micro double top with last week’s all time high, it is still a low probability short. The daily chart is still forming a bull flag after a strong 7 week rally. Hence, the odds still favor at least slightly higher prices.
Because the Emini is far above the daily moving average, many bulls want to buy closer to the average price. The Emini can get closer by simply going sideways. The end of December usually has small days. Therefore the 6 day tight trading range will probably continue. Furthermore, most days will probably be small. In addition, the 5 minute charts will probably be mostly in tight trading ranges. While it is possible that the Emini could have a strong breakout up or down, the odds favor mostly small trading range days.
Overnight Emini Globex trading
The Emini traded in a 4 point range overnight. Hence, it continued yesterday’s quiet trading. The Dow came to within 14 points of the 20,000 big round number yesterday, and it is still a magnet today.
Because it is resistance and the weekly chart is far above its average price (the moving average), the upside is probably limited over the next week or two. Yet, the momentum up on the daily and weekly charts is strong. Therefore, the downside is likely not great either. As a result, the Emini will probably continue in a narrow range for at least several more days.
EURUSD Forex Market Trading Strategies
There are several ways to draw the wedge bottom on the 240 minute EURUSD Forex chart. The reversal up and Thursday’s reversal up have not been strong. The bulls need to get above a lower high to convert the bear channel into a trading range or bull trend.
The EURUSD daily chart continues to work lower. Furthermore, there are targets below, like a measured move and par.
The follow-through after strong bear bars has been week. If the bulls can create a strong buy signal bar on the daily chart, that would be a possible lower low major trend reversal buy setup. The market is at the bottom of a 2 year range. Finally, currencies have an increased likelihood of reversing at the start of the year. Yet, despite these bullish factors, without a strong reversal up, the odds still favor lower prices.
Bulls are buying below bars and prior low on the daily and 60 minute charts for profitable scalps. This is an early sign that the EURUSD might be evolving into a trading range. Yet, a reversal up probably would take a series of strong bull trend bars. There is no sign of this at this point. The odds favor a move down to support around par.
Overnight EURUSD Forex trading
The EURUSD has had a weak rally overnight and it is 80 pips since yesterday’s low. Yet, the rally on the 60 minute chart does not have consecutive big bull trend bars. It therefore looks more like a bear flag than a bull trend. However, the bulls have a wedge bottom on the 240 minute chart. Hence, this rally could break strongly to the upside at any time.
Because a bear trend needs lower highs, the bears will try to prevent the rally from going above Thursday’s high. If it does, traders will conclude that the bear trend on the 240 minute chart had evolved into a trading range or bull trend. The bears will try to create a double top bear flag with Thursday’s high of 1.0479.
The bulls want a rally above that high. Even if the bulls succeed, the daily chart would still be in a bear trend. The bulls would probably have to get above the December 8 major lower high of 1.0872 before traders would believe that the bear trend had evolved into a trading range or a bull trend.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini was in a 2 – 3 point tight trading range for most of the day. There was a late bear breakout.
Today was a small day. Hence, there was no sense that the price was wrong. As a result, there was no momentum up or down. Small days like this are common at the end of the year. While there probably will be at least one trend day before the year ends next week, most days will likely continue small and sideways.
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.
“Bulls are buying below bars and prior low on the daily and 60 minute charts for profitable scalps. This is an early sign that the EURUSD might be evolving into a trading range.”
Al, I’m convinced developing the skills to recognize the component of price action you described above in quotes would make me a significantly better trader. Would you consider expounding on it with examples possibly in an Ask Al forum? Thanks for everything you do…