Emini all time high profit taking before FOMC meeting
Updated 6:44 a.m.
The Emini opened in the middle of the 3 day tight range. Yet, this is a lot of bars in a tight range so therefore the odds favor a bigger range today. There are magnets above (2500) and below (2486.75), and the Emini will probably test either one or both today. The Emini is deciding on the direction of the breakout. However, there is a 50% chance that the initial breakout will fail and reverse.
Because the 4 day rally has been week, the bulls will probably begin to take profits. This increases the chances of at least a small bear day today. However, at the moment, the Emini is in breakout mode. Traders are waiting for more information. They want to see a strong breakout up or down. Otherwise, today will continue to be a limit order market without swing trading opportunities. The odds are that there will be at least one swing up or down today, but the odds are against a big range day.
Pre-Open market analysis
The Emini made several new highs this week, but it has been sideways for 3 days. In addition, the FOMC will make an interest rate decision on Wednesday. Since that is a catalyst, the Emini will probably stay mostly sideways until then. Because the rally over the past few days has been weakening, the odds are against a strong rally today. However, the 4 day bull channel is steep enough to make a major reversal unlikely.
Weekly support and resistance
Since today is Friday, weekly support and resistance can be important, especially in the final hour. The most important price is the prior all-time high of August 8, which is 2486.75. The bears would like this week to close below that breakout point. The bulls want the week to close above the 2500 Big Round Number. If the Emini is within 5 points of either price in the final hour, it might quickly test the price.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex market. Because it has been in a tight range for several days, the odds favor more trading range trading. Yet, the sideways trading is a loss of momentum from Monday’s rally. Therefore, the odds are increasing for a pullback today. Furthermore, the Emini will probably get more neutral on the daily chart going into next Wednesday’s FOMC meeting. Since it has gone up for 5 days, it will probably pull back for a day or two starting today.
Finally, this week so far is a strong bull trend bar that is breaking to a new high. However, the bar is not especially big. In addition, the weekly chart has been mostly sideways for a few months. There is therefore an increased chance that the bar will look less bullish when it closes today. That would happen if it closed below the high and had a tail on top. A small selloff today would accomplish that.
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 chart’s selloff this week from a wedge top was strong. The bears therefore expect the 2 day rally to fail and form a lower high. If so, it would form the right shoulder of a head and shoulders top. The bulls see a double bottom bull flag at the moving average. They therefore want a break above the neck line and then a measured move up.
The EURUSD daily Forex chart continue its 2 day reversal up overnight. Yet, the selloff was strong enough to form a Big Up, Big Down pattern with last week’s rally. Since that creates confusion, a small trading range is likely. Therefore the rally will probably fail within a couple of days. At that point, the bears will see the rally as the right shoulder of a head and shoulders top. In addition, because there was a wedge top, they already expect at least 2 legs down. Yet, they need a strong break below the double bottom, which is also the neck line. They then would look for a measured move down. Hence, they expect a test of the August 17 low, which is the bottom of the wedge.
The bulls see a bull trend. They therefore see this week’s selloff as a test of the 20 week exponential moving average and last week’s low. This is therefore a double bottom bull flag. Hence, they want a break above the September 8 high, which is the neck line of the double bottom. They then would look for a measured move up.
Trading range is more likely than continued bull trend
The wedge top has a good shape. In addition, it is at major resistance on the monthly chart. Finally, this week’s selloff was strong. Consequently, the bear case is more likely. Therefore, it is more likely that the bears will get a 2nd leg sideways to down over the next couple of week’s. In addition, if the bulls get a breakout above the high, it is more likely to fail and reverse down that lead to a measured move up. Consequently, the odds favor a continued trading range for at least a few more weeks.
Overnight EURUSD Forex trading
I said yesterday the the 5 minute chart would probably rally 100 – 150 pips over the next couple of days. It is now up about 130 pips. Wednesday was a big bear day and therefore a sell climax. It’s high is therefore a magnet. In addition, its high is around a 50% pullback from this week’s selloff. While the bulls hope that the 2 day rally continues to far above last week’s high, a trading range is more likely. When the daily chart is in a trading range, both bulls and bears repeatedly are disappointed by the lack of follow-through. Yesterday was bad follow-through after Wednesday’s selloff. Early next week will probably be disappointing for the bulls.
Because the overnight rally is now around a 50% pullback and at the resistance of Wednesday’s lower high, the odds are that the rally on the 5 minute chart will begin to stall over the next couple of hours. Consequently, today will probably soon enter a trading range. Yet, if the rally continues up strongly, the bulls will continue to buy for a swing up to last week’s high. A trading range today is more likely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a brief early rally and then entered a tight range. The bulls got a little trend resumption up to another all-time high at the end of the day.
The Emini was again mostly sideways. The odds are that it will break above the 2500 big round number in the next few days. If Monday gaps above 2500, that would create a gap up on the weekly chart as well. Yet, the weekly and monthly charts are in buy climaxes. Therefore, the upside over the next few weeks is probably small.
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.
