Emini testing 2800 ahead of North Korea summit and FOMC
I will update again at the end of the day
Pre-Open market analysis
The Emini had a weak rally yesterday, but reversed down at the end of the day. While it is a sell signal bar on the daily chart, it has a bull body. In addition, the 2 week bull channel is tight. Therefore, it is a minor sell setup, which means a 1 – 2 day pullback is likely.
Will today finally get back above 2800 and test the March high? It might, but the odds are against a big move until after there is news from North Korea and after tomorrow’s FOMC announcement.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. Since yesterday was a weak sell signal bar in a strong 2 week rally, a big bear day is unlikely. However, because the rally is near resistance and there was a strong reversal down late yesterday, a strong bull trend day is also not likely. Finally, yesterday’s Big Up and then Big Down created Big Confusion, which is the hallmark of a trading range. The Emini is probably going to be sideways going into the uncertainty of tomorrow’s 11 a.m. PST FOMC announcement.
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 at resistance after Trump North Korea summit and before FOMC
The EURUSD daily Forex chart has gone sideways 4 days after a strong bear rally to the 20 day EMA and the May 22 high. This rally is the start of a 2 – 3 month trading range.
The EURUSD daily Forex chart has been in a tight trading range for 4 days. This is a limit order market. Therefore, traders are selling above yesterday’s high, buying below its low, and scalping for about 50 pips. Traders do not yet know if a 50% pullback begins at this resistance level or up around the May 14 high and 1.2000.
The 4 day tight trading range will probably continue through tomorrow’s 11 a.m. PST FOMC announcement. That will probably lead to a breakout. A bull breakout will probably last only a few days before beginning a 1 – 2 week pullback. A bear breakout will probably last 1 – 2 weeks before forming a higher low.
Extreme sell climax has evolved into a trading range for 1 – 3 months
In either case, traders now believe that the 7 week sell climax has now evolved into a trading range. Consequently, they are now willing to buy selloffs and will only sell rallies. Many will enter with limit orders, like buying below yesterday’s low or any recent low, and selling above yesterday’s high or any recent high. Some will trade small and scale in. For example, you can see that traders on Monday sold above Friday’s high. In addition, overnight, they bought below yesterday’s low. Furthermore, they will take smaller profits of 30 – 100 pips instead of holding onto a trade for 1 – 2 weeks.
The bulls want today to close near its high and at least above the open. This would make today a better buy signal bar for tomorrow. Consequently, it would be a higher probability High 2 bull flag and increase the chance of the rally continuing up to 1.2000 before pulling back.
More likely, the 1st pullback will come from around last week’s high. But, after an extreme sell climax, the odds favor a 2nd leg up. Therefore, traders will buy a reversal up from between a 50% pullback and the May low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart reversed up overnight from below yesterday’s low. It has been in a 30 pip range for 5 hours, which means that day traders have been scalping for 10 – 20 pips. There is no sign of a breakout up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini broke above an early triangle. However, it then reversed down from a 2nd Leg Bull Trap just below yesterday’s high. Finally, it reversed up from below yesterday’s low and formed a trading range day.
The Emini had its 3rd mostly sideways day today ahead of tomorrow’s FOMC announcement. It is just below the March major lower high and the 2800 Big Round Number. Both are resistance and therefore the daily chart is in breakout mode. However, the daily chart is in a bull trend. Therefore, even if the bears get a reversal down for a couple of weeks, the odds still favor a break to a new all-time high within a few months.
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,
Thanks for your end-of-the-day charts showing reasonable stop entries. Doing my own trading, printing the charts with my own ideas of good stop entries, then comparing them to yours is really helping.
Question on the entry above the big bull bar in the last hour “failed BO below yesteray’s L”. I’m assuming the proper stop is below the signal bar, but I did not like the added risk (big bar spanning almost 1/3 day’s range). After seeing good follow through do you think it would be okay to move my stop up to the midpoint of the signal bar? Or, should I just be trading smaller? Thanks.
Dave
I agree with you that the ideal stop is below the signal bar. If the risk is too big, putting it about 3 ticks below a 50% pullback is ok. Alternative, a trader can wait to see if the follow-through bar has a bull body. If so, he can buy the close and put the stop below its low, confident that there are probably so many bulls hoping for a pullback that one won’t come for at least several bars. But, as you know, the tighter the stop, the more likely it is to get hit. That is always the trade-off. When a trader reduces his risk, he always also reduces his probability. However, these alternatives are still good.