Emini strong buy climax, with bulls expecting tax cuts
Updated 6:45 a.m.
Today gapped down to the middle of yesterday’s range. This created a Big Up, Big Down pattern with yesterday. In addition, the 1st bar was a doji. Consequently, the bulls have lost a lot of control. This increases the chances for a trading range open. The bears will try to create a double top or wedge top just below the moving average. The bulls need a strong break above the moving average for an early low of the day.
Without many early big bear bars, the odds are against a bear day. Since the open retraced much of yesterday, the odds are against a strong bull day. Therefore the odds favor a trading range day and a trading range open. Consequently, the Emini will probably be mostly sideways for the 1st hour as it decides on the direction of the 1st swing. That swing will then probably lead to an opposite swing 1 – 3 hours later.
Pre-Open market analysis
The Emini had an exceptionally strong rally yesterday. There is a 50% chance that the bulls will get trend resumption up in the 1st 2 hours. Yet, because yesterday was also climactic, there is only a 25% chance of another strong bull trend day. Since it was a buy climax, there is a 75% chance of at least 2 legs sideways to down today, beginning by the end of the 2nd hour. However, even if the Emini pulls back for a day or two, the momentum up on the daily chart is very strong. Bulls will therefore buy the 1st pullback.
Because today is Friday, weekly support and resistance can be important. However, since none is close to the current price, they will probably not be factors today.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex market. While yesterday’s rally was extremely strong, it was too strong. It was therefore climactic. Hence, the odds the odds favor a pause day. This means that today will probably be small and mostly sideways. While a strong trend day is unlikely, a big bear trend day is more likely than a big bull trend day. This is because the climax was extreme and the 6th consecutive strong bull day. In addition, it was a buy vacuum test of the 2550 big round number, which is a resistance level.
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.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has a wedge bottom over the past 2 weeks. It is nested within a bigger wedge that started September 14. There is also a double bottom with the August 17 major higher low. Yet, the month-long reversal down is strong, and it began at the major resistance of the bottom of a 10 year trading range.
The EURUSD daily Forex chart is making a critical test. The bulls want the selloff to stay above the August 17 major higher low. If they succeed, the selloff would be just another higher low in a bull trend and a trading range. If the bears break below that low, the daily chart is then no longer making major higher lows. Consequently, it is no longer in a bull trend. It would therefore be a bear trend and a trading range.
Even if the bears get their breakout, the odds still favor a continued trading range rather than a bear trend. However, if the breakout is big and has consecutive big bear bars, the odds would favor at least 2 legs down, and possibly a measured move down to the July 5 major higher low. At the moment, the odds of that are 40%. There is a 60% chance that the bulls will get a 200 pip bounce beginning next week from today’s low or from not far below the August 17 major higher low.
Overnight EURUSD Forex trading
The 5 minute chart sold off strongly over the past 10 minutes, but reversed up from just 7 pips above the August 17 low. This makes it clear that everyone understands how important that low is. It determines whether the daily chart stays in either a bull trend and a trading range or becomes a bear trend and a trading range.
If the bulls get a close today near the day’s high, today would be a buy signal bar for Monday. It would also be a double bottom higher low with the August 17 low. Finally, it would be a nested wedge bottom at this support. If they get a strong rally on Monday, that would increase the odds of a 200 pip rally.
However, since the daily chart is in a trading range. The odds are that the bulls and bears will be disappointed. Therefore, the bears probably with get a small break below the August 17 low, but not strong follow-through. Additionally, if the bulls get a reversal, it probably will not be clearly strong. As a result, day traders will continue to mostly scalp as they wait for either a strong bear breakout or a strong reversal up.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After a gap down, the Emini sold off from a wedge opening reversal at the moving average. It reversed up from a wedge bottom and closed near the open, forming a trading range day.
The Emini gapped downs and had a weak selloff. It was a bear leg in a trading range day. The day closed near the open and became a doji inside bar on the daily chart. Since the 8 day rally is strong, today will be a buy signal bar for Monday. Any selloff over the next few days will probably be minor and therefore a bull flag.
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.
