Emini 60 minute wedge rally testing all-time high
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a weak bull reversal day, but it spent most of its time in a tight trading range. By going above last week’s high yesterday, the Emini triggered a buy signal on the weekly chart. The bulls hope to get a new all-time high this week. However, they 1st have to break above the high from 2 weeks ago, which is the top of a 4 week trading range.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex market. It therefore might gap above yesterday’s high and the 4 week trading range. Because the momentum up is good on the daily and weekly charts, the bulls expect a new all-time high within weeks. The target is close enough for the bulls to reach it this week. Therefore, there is an increased chance of a big bull trend day this week.
Whenever the Emini is testing resistance, there is also an increased chance of a reversal down. Therefore, despite yesterday being in a tight trading range, there is an increased chance of a surprisingly big bear day as well. However, yesterday’s tight trading range increases the odds of more trading range trading. This is true even though a big bull or bear trend day will probably come within the next few days.
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. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not in a position at the moment, these entries would be logical times for him to enter.
EURUSD Forex bear rally and trading range more likely than bull trend
The EURUSD daily Forex chart has reversed up strongly for 5 days. It is testing the 20 day EMA and the breakout point at the bottom of the 3 month trading range.
The EURUSD daily Forex chart reversed up strongly for 5 days after a strong 3 week selloff. Big Down, Big Up means Big Confusion. Confusion is one of the hallmarks of a trading range. Therefore, the daily chart will probably be sideways for at least a couple of weeks. The bears will try to create a double top bear flag. They then want a test of the 1.12 measured move target. However, the bulls want a double bottom with last week’s low and then the start of a bull trend.
I have been writing for months that the weekly chart is still bullish. Therefore, even if the bears reach their goal of 1.12, there will then be a reversal back up. The 3 month trading range is probably the Final Bear Flag in the 8 month swing down. When a market reverses up from a Final Bear Flag, the 1st target is always the top of the Final Flag. Here, that is 1.18, but the bulls might need several months to get there.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been sideways overnight after a buy climax up to resistance on the daily chart. Because the 5 day rally has been extreme and it has reached resistance, the odds favor sideways to down for several days. Therefore, day traders will mostly scalp.
Since the rally has been strong, swing traders will begin to look to day trade for a swing up once there is a 50% pullback to around 1.14. The bear day traders will be quicker to take profits for a couple of days until there is more of a trading range. At that point, they will look for 30 – 50 pip swings down from new highs on the 5 minute chart.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I sometimes also show limit order entries and entries on the close of bars. My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not in a position at the moment, these entries would be logical times for him to enter.
Today began as a Bull Trending Trading Range day. However, the Emini reversed down in the middle of the day after the cash index made a slight new all-time high. Because it reversed down and closed on its low, today is a sell signal bar on the daily chart for tomorrow. In addition, the 3 legs up over the past 3 weeks created a wedge top. If tomorrow gaps down, today would be a 1 day island top. The bears need big bear days over the next few days to convince traders that they have taken control.
But, the Emini all-time high is still a magnet just above. In addition, the past 3 days had bull bodies. Therefore, while today is a sell signal bar for tomorrow, the reversal will probably be minor. That means a few days of sideways to down trading. The odds favor a new all-time high in the Emini within the next couple weeks. It still might come this 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.
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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.
Al,
The reversal after the midday parabolic wedge was major. Looking back over my printed charts I’ve seen this over and over, where a PW leads to a MTR. Unlike a classic MTR that requires two counter trend legs and a test of the old high, these PW’s reverse without a test of the old high.
What do you think about looking for MTR’s after PW’s? Am I on to something here or do I need to take better notes?
Thanks.
Dave
Parabolic wedges are special. Most lead to bull flags or trading ranges. The lower high was therefore likely a minor reversal. Traders needed to see those consecutive bear bars to conclude that a major reversal was underway. That happens in about 30% of cases.
More often, when a parabolic wedge leads to a major trend reversal, there is a better looking major trend reversal. Here, the 1st leg down was small and weak. The rally to the lower high did not have many bars. That usually means that the lower high is minor. In general, only about 20% of minor reversals become major and only 40% of major reversal setups lead to an actual trend reversal (a major reversal).
Finally, today was a trending trading range day. When there is a reversal back into the lower range, only 30% of those reversals break strongly to a new low of the day. Today was a low probability event.