Emini awaiting central bank interest rate guidance
Updated 6:46 a.m.
The Emini opened with a big gap up and consecutive strong bull bars. It is Always In Long. This is a strong enough open to make a bear trend day unlikely. Therefore today will probably be either a bull trend day or mostly a trading range day.
If there is a selloff over the 1st hour, the bulls will buy again around the low of the day and the moving average. They would look for a double bottom with the low of the 1st bar, a High 2, or a wedge bottom. The reversal up would probably come from around the moving average.
If the opening rally continues for an hour or more, the Emini will then probably go sideways for several hours and enter Breakout Mode. The odds would favor Trend Resumption up at the end of the day, there there would be a 40% chance of at least a small reversal down in the final hour or two.
Pre-Open market analysis
The Emini has been sideways for 3 days. In addition, it is in the middle of a 3 month trading range. While it is in breakout mode, the odds still favor more trading range trading again today. Unless there is a strong breakout up or down with strong follow-through, traders will continue to mostly scalp and bet on reversals.
The Emini broke below the ii on Friday, but failed to sell off. It will probably try to break above the top today. This is especially try since the August 26 bull reversal was strong. The 4 day rally was likely to have a test back up to its high after a pullback. That pullback might have ended on Friday.
Since several central banks will make major policy announcements this month, the Emini is probably going to continue sideways until after those announcements.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. The Emini will therefore probably gap up today. This would then be a bull breakout above last week’s ii on the daily chart after a failed bear breakout. In addition, the September 1 high is a magnet.
However, the Emini has been in a trading range for a month. Therefore, both the bulls and bears have been disappointed by the lack of follow-through up and down. As a result, the odds are against a resumption of the bull trend. More likely, the best the bulls will get is a rally for a day or two.
Today’s bull breakout after last week’s failed breakout is bullish. There is therefore an increased chance of a bull trend day today. Yet, because the Emini has been sideways for a month, traders will need to see a very strong rally in the 1st hour or two today before they will be confident that today will be a bull trend day. Without that, the odds favor either a weak bull trend or a mostly sideways day. While any day can be a bear trend day, the context makes that less likely today.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
This is the 3rd push up over the past month on the daily EURUSD Forex chart. It is therefore a wedge top. The wedge bull channel is tight. In addition, the past 2 new highs had strong bull trend bars. Therefore the bulls might get one more new high before the bears get 2 legs down.
The daily EURUSD Forex chart now has a wedge top. Today fell below Friday’s low. Since Friday was a reversal bar, this is a sell signal on the daily chart. Yet, the 6 month bull channel. As a result, any reversal down will probably be minor. Consequently, the best the bears can probably get over the next 3 months is a trading range. Since the rally has been extreme, the trading range could begin with a deep pullback. An obvious magnet for a deep pullback is the breakout point. This is the May high and it is around 1.1600. The nearby target is the August 17 low, which is the bottom of the wedge.
Typically a buy climax and a wedge top lead to at least 2 legs and 10 bars sideways to down. Because the buy climax is also present on the weekly chart, a 10 bar pullback could be 3 months.
The bull case
The daily EURUSD Forex chart has been in a tight bull channel for 6 months. Bull trends are always forming wedge tops. Yet, most fail to have any significant pullback, and the trend continues higher. There might be a 50% chance of that happening here.
The odds are not as high as they might be because the monthly chart is testing the bottom of a 12 year trading range. This is therefore major resistance. In addition, the rally on the daily chart is around a measured move up from the June 27 bull breakout. Finally, the rally on the daily and weekly chart has lasted a lot of bars. It is therefore extreme and climactic.
The August 25 and September 7 bull breakouts on the daily chart were strong. As a result, there might be one more minor new high before the transition into a trading range begins. Less likely, the bulls will get a strong breakout above last week’s wedge top and then a measured move up of around 400 pips, based on the height of the 4 week wedge rally.
Overnight EURUSD Forex trading
The daily chart formed a reversal bar on Friday after a wedge top. Because the 5 minute chart traded below Friday’s low, it triggered the sell signal. Yet, the bears only got a 40 pips selloff over the past 4 hours. In addition, the 5 minute chart now has an expanding triangle bottom over the past 10 hours. Since a triangle is a trading range, bears will take profits and bulls will buy now that the selloff is at the bottom. Hence, the 5 minute chart is neutral.
Because the bears triggered a sell signal on the daily chart, there is an increased chance of a strong selloff on the 5 minute chart today. Yet, there is not sign of it. Therefore, more likely, the 10 hour trading range will probably continue. Consequently, day traders will mostly scalp. Yet, if there is a strong bear breakout or strong bull reversal, they might swing part of their trade.
If there is one more new high, the bears will probably sell at and above last week’s high, and the bulls will probably again take profits. As a result, the new high will probably reverse, like the past 2 new highs over the past month.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped up and rallied in a small pullback bull trend to a new all-time high.
Since today was a small pullback bull trend that broke to a new high, it was a buy climax. There is therefore a 75% chance of at least a couple hours of sideways to down trading tomorrow, starting by the end of the 2nd hour.
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.
