Emini monthly chart trying to form bull reversal buy signal bar in April
I will update again at the end of the day
Pre-Open market analysis
The Emini has been in a trading range for 3 months. On yesterday morning, I said that the bears would probably be disappointed by a lack of follow-through selling yesterday, and they were. Yesterday was a bull reversal day on the daily chart, and therefore a buy signal bar for today. Yet, Tuesday’s selloff was strong enough so that the bears will probably sell a 1 – 2 day rally. Unless today continues up strongly, the odds are that there will be at least a small 2nd leg down next week.
I have been saying for several days that the most important price is the open of the month at 2632.00. This is because April is the 3rd month in a pullback from a strong bull trend on the monthly chart. Pullbacks in strong trends usually end by the 3rd month.
The bulls wanted April to close on its high and therefore be a strong buy signal bar on the monthly chart. However, the fight now is over the open of the month. The bulls want a bull month. Hence, they want a close at least 1 tick above the month’s open.
The bears want a bear body. They prefer a close on the month’s low. This is unlikely.
Since the Emini has traded around the open of the month for 2 days, traders are clearly thinking about it. This means that it will continue to be important for the final 3 trading days of the month. As a result, the Emini might stay within 20 – 30 points of it for the rest of the month.
Overnight Emini Globex trading
The Emini is up 9 points in the Globex market. It therefore might gap above yesterday’s high. Yesterday is a buy signal bar for a failed bear breakout on the daily chart. Tuesday’s bear bar was huge. In addition, it was the 5th consecutive bear bar on the daily chart. Unless the bulls get strong bull trend days today and tomorrow, the odds favor a test of Tuesday’s low next week.
The 5 bear days in the 3 month trading range is extreme. Therefore, the odds favor at least a sideways to up day today. If the bulls get a strong rally on the open and keep the gap open, today will probably be a bull trend day. If they get up to Tuesday’s high, they will have erased the bear breakout. Hence, the rally up to 2800 will then again be likely.
Alternatively, if the bears close the gap early on with a series of bear trend bars, today will probably be a bear trend day. Since the open of the month is the most important price until Monday’s close, the bears want to keep the chart around that price so that they can close the month below its open.
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 trading range with double bottom and head and shoulders top
The EURUSD daily Forex chart dip less than a pip below the March 1 low overnight. The bulls see this as a double bottom. Furthermore, today is a micro double bottom with the bull bar from 2 days ago. The bears want the selloff from the head and shoulders top to continue.
The EURUSD daily Forex chart is in a trading range and therefore has both buy and sell setups. Most breakout attempts fail. Hence, the head and shoulders top has less than a 40% chance of continuing for a measured move down.
The bulls have a double bottom bull flag. While they want a rally that breaks above the top of the range, it is more likely that they will get a leg up in the range that lasts a week or two, like all of the other legs over the past 4 months.
If the bears get 2 big bear bars closing below the range, traders will look for a 400 pip measured move down. More likely, if the current selloff continues, it will reverse up from just below the breakout point on the daily chart. That is the double top at the September 8 and January 4 highs at 1.2088.
The next week will be interesting. The odds favor a bounce. The bulls want a 150 pip rally that retraces at least half of the 2 week selloff. But, if the chart enters a tight trading range, the bears will see a bear flag.
Since the breakout point is only 60 pips below, the odds will favor a bear breakout down to 1.2050 – 1.2090 within 2 weeks. That is important support. The chart is now close enough so that it will probably be unable to escape its gravitational pull. Once there, a reversal up is more likely than a bear trend.
20 Gap Bar buy setup on weekly chart
One final point. This is the 1st pullback to the 20 week EMA in more than 20 weeks. Therefore, there will probably be buyers here for a 20 Gap Bar buy setup. The last pullback was in November. The bulls formed a 3 week micro double bottom that led to a 1,000 pip rally.
Since there is a bear trend line above the January high, the odds still favor a rally to that resistance. That would require about a 500 pip rally over the next few months.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart reversed up 50 pips over the past few minutes. The odds are it will form a bull trend day today. Today will therefore be a micro double bottom with Tuesday, and a double bottom with March 1. It would be a buy signal bar for tomorrow.
Less likely, the rally will reverse and the day will close on its low. Because the reversal up was strong and the context is good for the bulls, the best the bears will probably get today is a trading range.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a small gap up and then rallied in a trend from the open bull trend.
The Emini yesterday was a buy signal bar on the daily chart, and today was a good entry bar. The bulls need more of a rally tomorrow to completely reverse Tuesday’s selloff. After 5 bear days, the bears might sell again around Tuesday’s high.
Tomorrow is Friday and this week’s open and high are magnets. The bulls want the week to close on its high so that it will be a strong buy signal bar for next week.
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.
