Emini buy and sell climaxes before government shutdown vote
Updated 6:48 a.m.
Monday’s buy signal is stronger than yesterday’s sell signal. The Emini was sideways yesterday and it will likely continue today. This means that traders will look for the 1st 1 – 3 hour trend to reverse and then start an opposite swing. The Emini needs to decide on the direction of the 1st swing.
There was hesitation on the open, despite triggering the sell Low 1 sell signal on the daily chart. This reduces the chances that today will be a big bear trend day.
The market is deciding whether the low of the day will be around yesterday’s low, or if there will be a swing down for 1 – 2 hours before a swing up begins. If there is a strong breakout up or down, today could be a trend day. But, the big reversals of the past few days makes a trading range day more likely. The odds are that the initial selling will end by the end of the 2nd hour.
Pre-Open market analysis
Tuesday’s rally was a Spike and the start of a channel. Wednesday completed the channel and evolved into a trading range. There was a late selloff that turned yesteray into a sell signal bar on the daily chart. It is therefore a Low 1 sell setup. Yet, after Wednesday’s big rally, the odds favor more trading range trading today. This is especially true with the possibility of another government shutdown on Friday.
The big selloff was strong enough so that at least a small 2nd leg sideways to down is likely. Yet, the monthly chart is so bullish that the bull trend will resume in 1 – 3 months.
Overnight Emini Globex trading
The Emini is up 12 points in the Globex session. Since the big reversals over the past few days make a trading range likely, the odds favor at least one swing up and one swing down again today. This is especially true given the uncertainty of tonight’s budget deal.
Because yesterday is a sell signal bar on the daily chart, the odds are today will trade below yesterday’s low. Yet, the Emini is probably going to be sideways for at least a few more days. This means that there will probably be buyers below yesterday’s low.
The most important prices still are the close of 2017, the 20 week EMA, and the January low. All are in the 2770 – 2780 area, and they will be magnets again today. This will continue until there is a strong trend up or down that goes far from this area.
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 bear leg in new trading range
The EURUSD daily Forex chart sold off for 5 days down to support at the January 18 low. The selloff lacks consecutive strong bear bars and it follows a 2 month tight bull channel. It is therefore likely a bear leg in what will become a 2 – 4 month trading range.
The EURUSD daily Forex chart has reversed down in a weak bear swing. It is now just above the support of the January 18 major higher low. Since the 3 month bull channel was tight and the selloff is not yet strong, the selling will probably become part of a 2 – 4 month trading range and not a bear trend.
Legs in trading ranges are typically complex. This means they usually subdivide into smaller legs. There have been no pullbacks in 5 days. This 5 day micro channel is therefore probably the 1st of 2 legs sideways to down. Consequently, the bears will sell a 100 – 150 pip rally. This is because they expect at least one more leg sideways to down. If the bears begin to get consecutive big bear bars closing on their lows, then this selloff could become a trend reversal. More likely, it will probably be the 1st bear leg in what will become a 2 – 4 month trading range.
Since the January 18 low is major, it is support. There will be buyers here. Therefore, there will probably be a 100 – 150 pip rally over the next week. The bulls want the bull trend to resume from a double bottom with the January 18 low. However, they will probably need at least a micro double bottom over the next few days. In addition, they will need consecutive big bull trend bars. A continuation of the month-long trading range is more likely.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 60 pips over the past hour. The overnight low is at support, just above the January 18 low. This could be the start of a 150 pullback from the 5 day selloff. The rally was strong enough so that the bulls will buy it and the 1st pullback for a swing up. They expect about a 50% retracement of the 5 day selloff. This would be a test of the 1.2400 area. However, they will look to take profits there because they know that the odds favor a 2nd leg down on the daily chart. In addition, the bears will look to sell there.
While the bears will sell a 50% pullback of this 5 day selloff, some will sell around the top of the overnight trading range at around 1.2300. A better location is around 1.2400, which is a magnet. Because the overnight low is in a buy zone, most bear day traders will only sell for scalps. Since a rally to around 1.2400 is likely and the month-long developing trading range will likely continue, the bulls will buy for small swing trades or for scalps.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off in a Small Pullback Bear Trend, but reversed up at Tuesday’s higher lows. The bear trend resumed and fell to Tuesday’s sell climax low.
The Emini tested Tuesday’s higher lows and bounced. However, it entered a trading range instead of reversing into a bull trend. It sold off again at the end of the day and fell below Tuesday’s low. The late selloff creates the possibility of a big gap down and huge bear day tomorrow. More likely, today was a sell vacuum test of Tuesday’s low. If so, tomorrow could rally and create a double bottom with Tuesday’s low. There is an increased chance of a big trend day up or down tomorrow.
Traders do not yet know if today will form a double bottom with Tuesday’s low that will lead to a new high, or be the start channel down in a Spike and Channel Bear Trend. Since the monthly chart is so strongly bullish, the odds are that the bulls will retake control within 1 – 3 months. However, there are targets down to 2400 and therefore there might still be a lot more selling to go.
Tomorrow is Friday so weekly support and resistance can be important. Magnets include the low of the week, the 20 week EMA, and last year’s close.
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.
