Emini buy climax and 60 minute Final Bull Flag
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied strongly to another new all-time high. Like most recent days, it then spent the next several hours going sideways. The bulls want the week to close on its high. While the bears prefer a close on the low, they would be happy to have the week close in the middle.
Monday and Tuesday’s tight trading range on the 60 minute chart is a possible Final Bull Flag. It is a magnet that could draw the Emini back down tomorrow or Friday. However, the odds continue to favor higher prices, although the bears will probably get a 1 – 2 day pullback soon.
Possible failed breakout above the January high
After a break above major resistance, like the January high, there is usually a Breakout Test. This is a reversal down to the breakout point. Traders want to see if the bulls will buy again at that price.
While a Breakout Test does not have to happen, traders will watch for it. The bears want the Emini to fall far below the breakout point. If it does, traders will begin to believe that the breakout failed. If the reversal down gains momentum, the bears could win. This week’s rally would then be a failed breakout of the top of the 8 month range.
The momentum up over the past 4 months favors the bulls. Therefore, the odds are that every selloff will fail and form a higher low. The rally should continue up to the measured move targets around 3100 over the next few months. However, any breakout can fail. Day traders will be ready to sell any strong reversal down.
Overnight Emini Globex trading
The Emini Globex chart is down 3 points. Today will probably open around the bottom of yesterday’s 5 hour trading range. The bears saw yesterday’s trading range as a double top or a higher high major trend reversal. The low of the range is the neck line. A measured move down would be close to yesterday’s low.
The past 4 days had early rallies and then protracted trading ranges. Since markets resist change, behavior tends to repeat. However, they usually display variations on the theme. Since the Emini might test down to the January high over the next week or two, one variation would be an early selloff and then a trading range. Day traders should be prepared for an early selloff today or tomorrow, followed by a trading range.
The Emini has spent most of the past week in trading ranges, despite early rallies. This increases the chance of more trading range trading today.
After a break above major resistance on the daily chart, the bulls want the week and month to close near the high tomorrow. This reduces the chances of strong selling before tomorrow’s close.
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 parabolic wedge buy climax just below resistance
The EURUSD daily Forex chart rallied strongly for 3 weeks to near the top of the 4 month trading range. It has been sideways for 3 days.
The EURUSD daily Forex chart had a bull trend reversal 3 week ago. It is now back in its 4 month trading range. Since traders believed that this was a fair price for many months, they will probably continue to hold this belief until it is clearly wrong. Consequently, the daily chart might go sideways for several more weeks before breaking out.
Because the weekly chart has been in a bull trend for a year and a half, a bull breakout is more likely than a bear breakout. But the 3 week rally on the daily chart has been in a series of buy climaxes. When that happens, the bulls typically begin to take profits (“exhausted bulls”). They then wait for about 10 bars and 2 sideways to down legs before buying again.
This is because they want to test the bears. If the bears are strong, the selloff could be more than 50%. That would allow the bulls to buy again around 1.15, which is much cheaper than today. Alternatively, the bears might not be able to drive the market down. Instead, the daily chart could go sideways. If that happens, the bulls will buy again after a sideways High 2 bull flag or a triangle.
Parabolic wedge buy climax transitions into a trading range
The 3 week parabolic wedge buy climax has been strong and there is room to the top of the 4 month range. Therefore, there might be 1 or 2 more small legs up before there is a 10 bar sideways to down move. However, the bulls will begin to take profits above the high of prior days and the bears will sell there. Also, both will buy below the lows of prior days. Finally, both believe the moves up and down will be brief. They therefore will take quick profits. This creates a trading range.
Overnight EURUSD Forex trading
The bulls bought below Tuesday’s low and the bears sold above yesterday’s high. Fading breakouts is an early sign of a bull trend evolving into a trading range. The EURUSD 5 minute chart is forming smaller legs. Day traders are taking quick profits. They are looking for reversals, especially from above yesterday’s high and below yesterday’s low. Therefore, the 5 minute chart is back to a scalping market.
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.
The Emini turned down from a lower high major trend reversal but found buyers just above the 60 minute EMA. It then had a dramatic selloff from a big double top bear flag late in the day. There were some buyers below yesterday’s low and the 60 minute EMA.
However, this selloff was strong enough to give the bears a 40% chance of closing the week and month back below the January high. The odds would still favor higher prices over the next few months. However, that would increase the chance of a 1 – 3 week pullback.
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.
Hi Al,
From an All In perspective today I got chopped up alot this morning. I bought above bar3, reversed below bar4, then again above bar9, below bar 12. All seemed like appropriate entries.
Do you recommend this or if I bought above bar3 DB/H2 (stop below) just go with that trade, win or lose? Because of the disappointment bar4, I likely would have tried to get out BE, which hit.
Thanks for your help.
Daniel
I talked about this in the chat room today. I will assume that you bought above 3 for a swing trade. It was reasonable to exit below bar 3 and look for another buy or sell entry. But, it did not get there until an hour later.
The open often does not give enough time to make good decisions. When in doubt, either get out or rely on the stop below 3.
One of my general rules is that I only rarely take a trade in the opposite direction until at least 2 bars after my exit. This is because I cannot be as objective as I want to be until I let some time pass. That would have prevented the short below 4
Another rule is to be extra careful when looking for swing trades in the 1st few bars of a trading range open. On most days, the swing will not begin for about an hour.
Thanks for the reply Al.