Emini outside down day and micro double top
I will update again at the end of the day.
Pre-Open market analysis
After a 4 day parabolic wedge rally on the 60 minute chart, the Emini has been in a tight range for 3 days. However, yesterday was an outside down day. It also was a micro double top on the daily chart. It is therefore a sell signal bar for today. Furthermore, a gap down today would create a 3 day island top. That could lead to a deeper pullback. But, the odds still favor a new all-time high within a couple months.
Today is Friday, but there is no nearby major weekly support or resistance. The bulls want the week to close on its high. At a minimum, they want a close above the midpoint and above last week’s high. The bears always want the opposite. If the week closes below its midpoint, it will be a sell signal bar on the weekly chart for next week.
Overnight Emini Globex trading
The Emini is down 13 points in the Globex session. It will probably gap down and create a 3 day island top. The bears hope that this is the start of a double top reversal with the January high. More likely, it is a bear leg in a 4 month bull channel. However, if the bears begin to get a series of big bear trend days, the selloff could be deep. The next major support is the August 2 buy climax low at 2795.00.
The gap down will be big. It is coming after a buy climax and at the top of a 7 month trading range. This increases the chance of at least several days down. Bear legs typically have mostly bear trend days. Therefore, there is an increased chance of a bear trend day today.
However, the 4 day rally was strong, as has been the leg up from June 28. There is therefore a 40% chance of a strong bull trend day that rallies back above yesterday’s low and closes the gap. Traders need to be ready for anything today. The big gap down at major resistance increases the odds of a trend day up or down. If there is a big trend day, down is more likely.
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 breakout below 3 month trading range
The EURUSD daily Forex chart has a big bear trend bar so far today. It is a breakout below a 3 month trading range and a resumption of the May bear trend.
The EURUSD daily Forex chart broke below the 3 month trading range today. For the past several weeks, I said that there would probably be a breakout within a couple of weeks because the daily chart worked its way into a triangle apex. Last week, I said that the 5 consecutive bear days made a bear breakout likely. Today is the breakout. The bigger a bear day the bears get today and the more it closes on its low, the more likely the breakout will succeed. In addition, if there are follow-through bear days over the next few days, the odds will favor a 300 pip measured move down.
If the bulls get a strong bull trend day in the next couple of days and then additional bull days, the breakout will fail. They have a 40% chance of success at the moment.
A big breakout from an extended trading range changes the market from a trading range to a trend. That increases the odds of more trend days over the next week or more. Therefore, day traders will be more willing to hold onto swing trades for more pips.
Overnight EURUSD Forex trading
Every trend has pauses. When there is a trading range on the 5 minute chart, day traders will scalp. The 5 minute chart has been in a 40 pip range for the past 8 hours, which is a scalper’s market. However, day traders will be more willing to swing part of their shorts because of the new bear trend on the daily 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.
The Emini gapped down and formed a 3 day island top. It sold off to the 50% pullback level from last week’s 4 day rally and reversed up strongly at the end of the day. Today was a doji day on the daily chart. The bulls hope for a gap up on Monday. That would create a one day island bottom and erase much of today’s bearishness. More likely, the Emini will pull back for at least a couple weeks.
The candlestick on the weekly chart is also a doji and a sell signal bar for next week. A reversal after a buy climax typically falls in at least 2 legs and lasts 10 or more bars. Therefore, the Emini will probably pull back for at least a couple of weeks. It might test last week’s buy climax low at 2795.00.
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.
Al: Regarding action signals of today, you had a sell signal on the 4th bar of the day which was a bear reversal bar. There were no sell signals issued on the other large bear bars that followed. On the other hand, the second bear leg that took e-mini to the day’s low had multiple sell signals issued after the bear breakout- one almost after every bear bar. It will be very helpful- if you please explain the difference in context. Thanks
When there is a big gap down, there is only a 20% chance of a big bear trend on the open. There is an 80% chance that the market will enter a trading range until it gets closer to the 20 bar EMA.
In a trading range, traders want to buy low, not sell low. If the early trading is probably in a trading range, then it is better to look to sell a reversal down from the top and buy a reversal up from the bottom. While the 2nd sell was probably okay, the probability of a profitable short falls quickly once near the low. Look at what happened to the bears who sold below the 4th consecutive bear bar.