Posted 7:11 a.m.
The Emini opened today with a continuation of yesterday’s weak bear channel. It is testing yesterday’s low, which was last week’s low. It should reach the weekly moving average today or tomorrow, and possibly within the first couple of hours.
Because this selloff lacks consecutive big bear bars and is testing support, it is more likely a bear channel in what will become a big trading range. However, there is no credible bottom yet, and there are still magnets below. Without a strong bear breakout, it is difficult for traders learning how to trade the markets to short.
Without a clear bottom, the probability of a long is low. The bulls need either a strong bottom or a strong bull breakout with follow-through. Until there is a strong breakout in either direction, most traders should just wait to day trade. This is a limit order market and it is better to be patient.
My thoughts before the open: Learn to trade futures in breakout mode
Although the S&P Emini is relatively oversold on the daily chart because legs within trading ranges usually do not go too far, the weekly moving average has been major support for 6 months. The Emini has tested it about 10 times on the weekly chart. Since it is only about 10 points below the current Globex price and it has been a strong magnet, the odds are that the Emini will get there today or tomorrow.
Since it has been support and the Emini has sold off for about 10 days, traders learning how to trade the market should realize that the odds are that the Emini will bounce after poking below that weekly moving average. If the Emini gets there today or tomorrow and begins to reverse up, it will form a 2 week long wedge bottom on the 60 minute chart, and this could lead to a rally for at least several days.
Most of the 5 minute bars for the past 2 weeks have been within tight trading ranges, which is consistent with the Emini being in a tight trading range on the daily and weekly charts, and with the past 5 bars on the daily chart being dojis. However, the market cycle gives us a trading tip…the market tends to operate in cycles, and since it is just above support, this trading range price action will probably be followed this week by either a strong reversal up or a strong bear breakout. The FOMC meeting on June 17th might be the excuse for this intense trading range price action, and the Emini might wait until then before it has its strong breakout.
The Globex session is down a few points, but it traded within a tight trading range, and Friday was a tight trading range. The intraday trading strategy is to expect this to continue, and high probability trading is to continue to expect breakouts up and down to fail. Online day traders will continue to look for brief swings, but they will be quick to take profits. Day traders expect most of the trading to be scalping with limit order, but there are always several stop entry setups, even when the market is within a tight trading range. As always, online daytraders will look for breakouts. If one is strong enough, they will look for a second leg and a swing trade.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini was in a weak bear channel for the first half of the day, but then had a strong bear breakout midday and accelerated down. After a low 2 rally, it sold off to a new low of the day.
The Emini is testing the weekly moving average and the December high, and it is at the bottom of a 60 minute spike and channel bear trend, and at a daily bull trend line and a 60 minute bear trend channel line. Since it is oversold and at support, the odds favor a rally tomorrow. However, if the move down to the monthly moving average has begun, the selling might become relentless as the Emini changes from a trading range to a bear trend on the daily chart. It has not yet, and the odds still favor a bounce tomorrow, but traders need to be ready for the change because there is an 80% chance of a 10% or more correction this year.
Best Forex trading strategies
Several markets should provide good Forex trading opportunities today. The 60 minute EURUSD had been in a trading range for a month. It sold off from a wedge top last week, but bounced once it tested the bottom of the wedge. The bounce initially was a bear flag, but it rallied in the European session and is trying to have a bull breakout above that bear flag. That wedge top was likely to be followed by 2 legs down, and it was, and then a trading range. This bull breakout on the 5 minute chart is probably a bull leg within that developing trading range. However, it is strong enough so that traders learning how to trade the market will look to buy pullbacks, expecting that the first bear reversal attempts will result in a trading range, and not a bear trend.
The EURJPY also rallied in the European session, but has had consecutive buy climaxes. Traders who are trading Forex for a living see the rally as strong enough to make any reversal down more likely part of a trading range than the start of a bear trend. Traders will look to buy pullbacks. If more bear bars form, bears will begin to sell rallies, using wide stops and looking for Forex scalps.
The USDCAD is trending down on the 5 minute chart to test the neckline of a 60 minute double top at around 1.2370. The bulls are hoping that this selloff is just a sell vacuum of support. They will look for a reversal pattern in that area. If a major trend reversal develops there, it will provide a good setup for Forex trading for beginners. Since it is currently near the bottom of the range, even though the selling has been strong, it will probably begin to form a trading range over the next couple of hours.
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, and a 2 day free trial is available.
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.
