Emini trend resumption down to March 2 low around 2650
Updated 6:45 a.m.
Today opened with a big gap down and a bear bar. However, the low was a Leg 1 = Leg 2 measured move from Monday’s selloff. In addition, it was a measured move down from yesterday’s range. Finally, it was a test of the 2017 close. This is a possible low of the day.
The 2nd bar reversed up but could not close on its high. However, this is a possible low for the 1st hour. The bears will try for a wedge or double top bear flag at the moving average. The bulls want a double bottom or a higher low major trend reversal. Since the 1st 2 bars both have tails, both are weak. This increases the chances of a trading range open and a sideways to up move to the EMA over the 1st hour. Those 2 bars also reduce the chance of a strong trend day up or down.
Pre-Open market analysis
The Emini rallied strongly yesterday to above Monday’s high. This triggered a buy signal on the daily chart. Yet, after 7 bear days, the odds were that there would be more sellers than buyers above Tuesday’s high. The weekly chart is still on a sell signal after breaking below last week’s low. The market is deciding whether the 6 bar selloff on the daily chart is a bull flag or the start of a swing down. Because the monthly chart is so bullish, the odds favor a new all-time high by the end of April, whether or not there is a test down to the March 2 low 1st.
The bar on the weekly chart closes tomorrow. The bulls want a rally to above last Friday’s low, which would close the gap on the weekly chart. A gap up on any day will create an island bottom on the daily chart. This would negate the 6 day island top.
The bears want the week to close on its low. That would be a strong entry bar for the weekly sell signal. It would therefore make a test of the March 2 low likely. Since there were 7 consecutive bear days over the past 2 weeks, the odds favor sideways to down trading for at least a few days.
Overnight Emini Globex trading
The Emini is down 29 points in the Globex session. It is therefore in a 2nd leg down from Monday’s strong selloff. Today will open with a big gap down. When there is a big gap, there is an increased chance of a trend day. Furthermore, if there is a trend, it is more likely to be in the direction of the gap (here, down).
Yet, a big gap down means that the Emini will be far below its EMA. Traders do not like to sell when the market is far below its average price. As a result, a big gap down usually results in a sideways 1st hour, even if there is an initial selloff for about 5 bars. In the 1st hour, the Emini typically begins to go sideways to up to the EMA. Once there, the bears will look for a double top or wedge bear flag to sell, hoping for a bear trend and early high of the day.
The bulls prefer an immediate strong reversal up. About 10% of the time, there is a series of big bull bars on the open and the day becomes a strong bull trend day. More often, the best the bulls can get is a trading range for about an hour. If they succeed, they then want a bull breakout above the range, and then a swing up to close the gap.
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 pullback from breakout above small bull flag
The EURUSD daily Forex chart has been in a tight trading range for 5 days. It is also in the middle of a 3 month range. There is no sign of a breakout up or down.
The EURUSD daily Forex chart is almost completely neutral and in breakout mode. It has been in a tight range for 5 days in the middle of a 3 month trading range. Since the trend before the trading range was up, the bulls are slightly more likely to get an upside breakout. But, their advantage is minimal.
Traders see a bull pattern one day and then an equally hopeful bear pattern a few days later. Until there is a breakout, there is no breakout. It is important to realize that trading ranges can last longer than what traders think is reasonable.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 80 pips overnight. The bears want the reversal down to continue. However, the bulls see it as a 50% retracement of yesterday’s rally. That rally was from a 3 week wedge bull flag. Therefore, if the bulls can halt the selling at around 1.23 and then get a rally, they would try for a 2nd leg up from the rally that began on March 1.
A Leg 1 = Leg 2 measured move is a reasonable target. That is around the 1.2550 area and the February high. The next couple of days are important. if the bulls can create a couple consecutive big bull days, the odds will favor a test of 1.2550. Since there is a bear trend line on the monthly chart above 1.26, that magnet would be the next target.
The bulls will look for a bull breakout today or tomorrow. If they get it, they will swing part of their position for a test of 1.26.
The bears always want the opposite. They need to end the bull case. A break below the March 20 low would be a break below the 3 week bull flag. That would increase the chance of a test of the March 1 low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a big gap down and then a sell climax that fell below the 2017 close. After a strong rally, it collapsed into the close to below the March low.
After a sell climax to below the 2017 close, the bulls got a strong reversal up. The bears got trend resumption down in the middle of the day. The selloff broke below the March low in a huge sell climax. The bears need follow-through tomorrow to increase their odds of a test of the February low.
Tomorrow is the last day of the week. This week is an entry bar on the weekly chart for a Low 2 sell signal. The bears want this week to be a big bear bar closing on its low. That would increase the odds of follow-through selling next week, and then a test of the February low.
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.
Hi Al,
bear bar 10, which trapped bulls and started sell off feels like not having enough informations (BO-PB bar) for triggering sell off. Also neither 15 or 60 min supported it at the time.
But when I look at 10 min chart the story is different with 10, 15 and 60 min chart in fovour.
Also 10 min trapped bulls managed to get out be at 2689.50 later in the day.
The question is, when 10 min trigger 5 min chart had 3 bear bars (higher prob sell), which is exactly what you often say. If you wanna higher prob. Wait for 3 bars.
Was the bear bar 10 on 5 min chart considered only as BO – PB or did context of situation made it DT bear flag?
Thank you
I talked about this in the chat room. When there is a big gap down, the market usually goes sideways to up to near the EMA. The bulls need a strong break above it and not just a strong rally to it. The bears try to turn the rally into a bear flag, like a L2 , DT, or wedge. The bears won today.
on the emini, why was the 5th bar of the day not a sell signal?
and on the emini, why was the 1115 bull bar that bounced on the moving average not a buy signal?
sure, in hindsight they were not signals, but in real time, they seemed to be.
thanks
The 5th bar followed 3 consecutive bull bars on the open. There is a 60% chance of a 2nd leg up.
The 11:15 bar was a trap and I talked about it in the room as it happened. I said do not buy it because it was a trap. Since the day was a likely TR day, the odds were that the pullback would test a major higher low. In addition, the big wedge was likely to have a bigger 2 legged move down. Finally, it followed a surprise bar, which usually means at least one more leg down.