Emini testing 2800 Big Round Number and major lower high
I will update again at the end of the day
Pre-Open market analysis
The Emini daily chart had an outside down day yesterday that closed below Tuesday’s low. It is therefore a sell signal bar for today. Furthermore, yesterday was the 3rd leg up in a small parabolic wedge on the daily chart and a 60 minute wedge rally. In addition, it was just below the resistance of the 2800 Big Round Number and the March major lower high. Today might therefore be the start of 2 or more weeks of sideways to down trading. There is an increased chance of a bear trend day today.
Since yesterday is a sell signal bar on the daily chart, traders want to know if there are more buyers or sellers below its low. Therefore, the bears will try to break below yesterday’s low in the 1st hour today to trigger the sell signal. However, they will not get a big gap down open. They are therefore not as strong as they could have been.
They need a big bear today today and again tomorrow to make traders believe that they are in control of the daily chart. At a minimum, they want the week to have a bear body. That means their minimum goal for the week is to have tomorrow close below 2784.50. If they achieve that, this week will be a sell signal bar for next week on the weekly chart. That would increase chance of lower prices over the next few weeks.
The bulls need an early reversal up from yesterday’s low
The bulls would like today to be an inside day with a close above the open. Today would then be an ioi bull flag on the daily chart. The bulls will therefore buy an early selloff to just above yesterday’s low. If today falls below yesterday’s low, the selloff will trigger a sell on the daily chart. However, the bulls would then try to get a reversal back up, which would make the sell signal fail.
Overnight Emini Globex trading
The Emini is up 7 points in the Globex session. Yesterday ended with an expanding triangle bottom after the FOMC report. The bulls hope it will be a bull flag and that the 2 week rally will continue up to the March high.
Since yesterday is a sell signal bar on the daily chart, there probably will be a selloff in the 1st 2 hours to test yesterday’s low. If so, traders will look for a reversal up from around yesterday’s low. The minimum goal for the bulls is a trading range day today. Next, they want a close above the open and a bull inside day. A big bull trend day is unlikely after yesterday’s strong reversal down.
If there is a strong break below yesterday’s low, today could be a big bear trend day. The 1st target for the bears is 2763.75. That is the beginning of the wedge rally on the 60 minute chart. If the bulls cannot get a reversal up from around yesterday’s low, they will probably find support there. The odds are that the Emini will test that low within a week because of the wedge top on the 60 minute chart.
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 outside down day at resistance
EURUSD daily Forex chart has outside down day at resistance. It is reversing down from a double top with the May 22 high. In addition, this rally is a 20 Gap Bar bear flag at the EMA.
The EURUSD daily Forex chart has been testing the 20 day EMA for the past 7 days. Since this is the 1st touch of the average in over 20 days (more like 50 days), it is a 20 Gap Bar Sell Signal. The bears want a resumption of the bear trend. However, since the 9 week selloff had consecutive sell climaxes at major support, a trading range is more likely.
Therefore, if this is the start of a 1 – 2 week selloff, it will probably be a pullback from the 2 week rally. There are probably buyers around the May low and there will then be a 2nd leg sideways to up. The bulls hope that the 2nd leg up will form a double bottom with the May low. They then will try for a breakout above today’s high, which would be the neck line of the double bottom. A measured move up would be around the May 14 high and the 1.2000 Big Round Number.
Trading range is more likely than a resumption of bear trend
The daily chart is probably in a trading range that will last 2 – 3 months. If so, the overnight outside down could fail tomorrow. The chart could then continue higher and create a bigger 1st leg up.
More likely, the overnight selloff will continue down and test the May low. The 2nd leg up could begin either around a 50% pullback to around 1.16, or at or below the May low.
The bears need a strong break below the May low before traders will conclude that the bear trend is resuming. It is important to remember that the reversal up began at the major support of the November 7 low. That increases the chances of a double bottom test of that area and then a 2nd leg up.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off from above yesterday’s high to below its low. Today is therefore an outside down day. Since the daily chart is at resistance and the selloff was strong, the odds are that there will be follow-through selling over the next week. Consequently, unless there is a strong reversal back up, day traders will sell rallies for a swing down to at least 1.16.
Any selloff that lasts several days will have bear rallies. If the 5 minute chart begins to go sideways for an hour or two, the bulls will buy for 10 – 20 pip scalps. However, it will be easier to make money by selling rallies until there is a strong reversal back up.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed down from below yesterday’s high. It then reversed up from above yesterday’s low. Today was therefore an inside day and a trading range day. Since it had higher lows and lower highs, it was also a triangle.
After yesterday’s outside day, today was an inside day. This creates an ioi breakout mode setup on the daily chart. Because the bull channel is tight, it is a weak sell setup. Since the resistance of the March high is just above, and there is a 4 bar tight trading range, it is a weak buy setup. Therefore, tomorrow will probably be mostly sideways.
In addition, the week’s range has been small. Therefore, this week is a potential sell signal bar on the weekly chart for next week. The bears want a bear bar and the bulls want the week to close above the open. Consequently, the open of the week will be an important price again tomorrow.
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.
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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.
Hi Al, if you sold close bar 4, would you get out be when bar 6 formed or would you keep SL above swing? Thank you
Because of the possible wedge bull flag PB to the MA and the bull body, traders would exit longs and many would buy above bar 6.