Trump rally continuing into January 19 government shutdown vote
Updated 6:46 a.m.
The Emini opened with a big bear bar after yesterday’s strong, late rally. The bears want a parabolic wedge top. Yet, yesterday’s rally was strong enough to make either a trading range or bull trend more likely today. The bears therefore will need a strong reversal down with several big bear bars before traders believe today will be a bear trend day.
The bulls need consecutive big bull bars for traders to conclude that yesterday’s late rally was a resumption of the bull trend from 8 days ago. Without that, the odds are that today will be another trading range day in the 8 day tight trading range.
Pre-Open market analysis
The Emini formed an outside down day yesterday on the daily chart. Yet, it was the 7th day in a tight trading range, and it tested the bottom of that range. In addition, it did not have a huge bear body closing on its low. Therefore, it does not significantly increase the odds of a reversal down. Instead, it was just another day in the tight range. The strong rally into the close increases the odds of a rally today and into tomorrow, which is the final trading day of the year.
Overnight Emini Globex trading
The Emini is up about 3 points in the Globex market. Since yesterday’s late reversal up was strong, the bulls will try for follow-through buying today. In addition, the Emini has been at the bottom of a bull flag on the daily chart for 8 days. Yesterday’s reversal therefore might be the start of another leg up on the daily chart. Consequently, there is an increased chance of a bull trend day today.
Furthermore, since there has been no yearend profit taking, the bulls will try to have the year close at a new all-time high tomorrow. This also increases the chance of a bull trend day today and tomorrow.
There is always a bear argument. However, the Emini is at the bottom of an 8 day trading range in a bull trend on the daily chart. Unless the bears break strongly below yesterday’s low, the best they will probably get today is a bear leg in a trading range today. Since most trading range breakout attempts fail, the odds are against a bear trend day today.
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 Forex market trading strategies
The EURUSD daily Forex chart has been in a bull trend since November 7. However, the trend is within a 6 month trading range. It is now in a 3rd push up from the December 12 double bottom bull flag. This wedge is nested within a bigger wedge that began with the October 10 high.
The EURUSD daily Forex chart is in a nested wedge bull channel. Currencies often reverse in early January. However, there is no reversal yet. Consequently, the bull trend will likely continue at least a little longer.
The bulls want a strong breakout above the September high. But, that high is at major resistance on the monthly chart. Furthermore, trading ranges resist breaking out. As a result, the 2 month rally will probably be a bull leg in the 6 month range. Therefore, the odds are against a strong breakout above the September high.
However, there is room to resistance above. If the bears are unable to create a reversal down from the 3 week wedge within the next couple of days, the top of the 2 month wedge from the October 10 high is the next magnet. Above that, the September 8 high is the next resistance level.
Since the 2 month rally is now near the top of the 6 month trading range, the bears will begin to look for sell setups for a swing down. That is more likely than a successful breakout above the September 8 top of the range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has rallied for 2 days. Because this is the 3rd leg up in a 3 week wedge rally, the bears will look for a reversal today or tomorrow.
Yet, the 2 day rally is strong. Consequently, the bears will probably need a trading range lasting several hours before they can create a reversal. As a result, the odds favor either a trading range today now that the chart is testing the November 27 high, or a breakout above that high. Trading ranges are more common than breakouts. Therefore, the overnight rally will probably begin to go sideways today. If so, the bears will begin to sell rallies for scalps. The bulls will continue to hold for a swing up and bull day traders will buy reversals for scalps.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
On the open, the Emini pulled back from yesterday’s late rally and today’s gap up. It spent most of the day in a tight trading range, and rallied some at the end of the day.
Tomorrow is the last trading day of the year. Bulls and bears want to do something dramatic. It therefore has a greater chance of being a trend day up or down. Today was the 9th day in a tight trading range on the daily chart. The bears want a gap down to create a 2 week island top. Alternatively, they want a big bear breakout. The bulls want tomorrow to close at a new all-time high. That would require a bull trend day tomorrow.
While there is an increased chance of a trend tomorrow, the odds are not very high. Tight trading ranges resist breaking out. Therefore, the 9 day tight trading range reduces the chance for what otherwise would be a day with a good possibility of being a trend day.
Tomorrow is the last day of the week, month, quarter, and year. Weekly and monthly support and resistance will therefore be magnets, especially in final hour. The most important prices will be this week’s open and last week’s low. If tomorrow is a big bear day, then the open of the month will be a magnet as well.
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.
