Posted 7:04 a.m.
The Emini sold off on the open to test the open of the week. The week is currently a small doji candle, and it will probably stay that way. This means that today will probably not be a big trend day up or down. Instead, it will probably be a trading range day.
The bulls want an opening reversal at the open of the week, and they are trying to create first higher low in 3 days. The bears want the broad bear channel to continue. The odds favor more trading range trading today, but traders will be willing to swing trade if there is a breakout above or below the 3 day trading range if there is follow-through.
Without that, traders will continue to scalp for quick profits, buying low, and selling high. If reversals do not look strong, day traders will wait for 2nd entries and strong breakouts up from the bottom or down from the top.
At the moment, the bulls are rallying from a higher low major trend reversal and an opening reversal test of the open of the week. Unless they break strongly above the 3 day trading range, the trading range will probably continue today.
My thoughts before the open: Double top bear flag
Yesterday completed the first leg down on the smallest 60 minute wedge top. There are larger 60 minute wedges as well, and the Emini still might form a much larger 1st leg down. The rally at the end of the day was a test of the top of the trading range that began to form 2 days ago. The bears want a double top bear flag, which could lead to a 2nd leg down after the small 60 minute wedge top. The bulls want a breakout above the trading range and then a measured move up to a new all-time high. Since the 60 minute wedge has a good shape and it formed in a good location (after a breakout to a new all-time high and at a weekly measured move), the odds of a strong rally from here are small.
The 60 minute chart had a moving average gap bar (a high below the moving average). That usually leads to the final rally of the bull trend before a major trend reversal top triggers. This is more evidence that the upside over the next couple of weeks will be limited.
The Emini will probably go mostly sideways for several weeks after those 10 consecutive bull trend days. When the market is in a tight trading range, it tends to have more trading range days. Yesterday was in a broad bear channel and a trading range, but ended always in long. The bulls need the breakout above the trading range. Until there is a breakout, there is no breakout, and the trading range continues.
Summary of today’s price action and what to expect tomorrow
The Emini was in a trading range and it closed near the open of the week (OOW), creating a small doji candle on the weekly chart.
After 10 consecutive bull trend days, the market will probably consolidate more for another week or two. Since there are wedge tops on the 60 minute chart, the Emini will probably pull back to test the 2082.75 higher low, which is the nearest important higher low. The bulls want a new all-time high, but even if they succeed, the near term upside is limited by how overbought the market is on all higher time frames.
See the weekly update for a discussion of the weekly 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.
