Posted 6:56 a.m.
The Emini gapped up to around a 50% pullback of yesterday’s range and got immediate follow-through selling. However, the gap up was so big that the odds favor a trading range day (big down, big up, big confusion). Although the Emini is Always In short, bulls will look for an opening reversal up from around the moving average, the May low, and yesterday’s close.
Less likely, the bears will create a bear trend from the open day and a strong bear trend day. With the selloff as strong as it is, bulls will wait for a 2nd entry buy. However, there should be a swing up that begins within the first hour or two.
My thoughts before the open: Learn how to trade a pullback
The one thing that was likely today was that the Emini would rally for at least a couple of hours and a couple of legs after yesterday’s extreme sell climax. Traders learning how to trade the markets can see that the Globex chart has already achieved its goal, and the day session should as well. There is sometimes follow-through selling for the 1st hour or two, but the odds are high that there will be at least a 2 hour broad trading range or rally, whether or not there is some early selling.
As I am writing, the Emini is up around 15 points in the Globex session, which puts it at around a 50% retracement of yesterday’s range. This is an area where bears will look to sell. If they succeed in creating an early selloff, bulls will look to buy an opening reversal, which would also be a higher low major trend reversal.
Can today trade back above yesterday’s high? While it is possible, it is unlikely. It is more likely that today will be a trading range day within yesterday’s range, which is an inside candlestick pattern on the daily chart. However, because the trend down was so big and tight yesterday, the legs within today’s trading range will probably offer good swing trades. The day trading tip for today is to look for swing trades in both directions. There should be several high probability trading setups today for day traders.
The Emini has had 7 consecutive bear bodies on the daily chart. This happens less than once a year, and therefore it is unsustainable. If the Emini is in the early stages of a huge bear trend (I do not believe it is), then it might have another big bear trend day today. More likely, no matter how big the gap up is today, the day will close above its open and have a bull body on the daily chart.
The selling yesterday was strong enough for the odds to now favor this as the start of the move down to the monthly moving average. Today is the last day of the month so monthly support and resistance are important. The obvious support is last month’s low of 2053.50 and yesterday’s low (this month’s low) of 2047.25. It does not matter whether today closes 5 – 10 points above or below either because the damage has been done by yesterday’s big selloff. This month will probably close near its low and be a sell signal bar. If this month closes far below its midpoint, it will be a more reliable signal bar and it will increase the chances that July will trigger the short by falling off below June’s low.
The odds favor follow-through selling over the next few weeks, even if the Emini has a 50% bounce back up to the gap above yesterday’s high. However, the bears need to keep yesterday’s gap up as a sign of strength. If the bulls are able to get back above Friday’s low and close the gap, the odds will favor a new high.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had follow-through selling on the open, but reversed up from below yesterday’s low and formed a trading range day with a close near last month’s low.
Today was the last day of the month and last month’s low was the only nearby support or resistance. It was the magnet that controlled the price action today. Today is the 7th consecutive bear day on the daily chart, which is extremely unusual, so the odds are probably 70% or more that tomorrow will close above the open, especially if tomorrow has a low open (around today’s close or lower).
The June bar closed and created a sell signal bar on the monthly chart in a buy climax. Traders need to know what is below that signal bar. Its low is today’s low. The odds are that the Emini will trade below today’s low tomorrow or within a week or two. I also think that the odds are better than 50% that the 10% correction began with yesterday’s big bear breakout. However, even though today had a big bear body, today closed above yesterday’s close.
Since tomorrow is probably going to have bull body and the next several days are some of the most bullish of the year, the Emini might go up to test the gap above yesterday’s high. If the bulls can close that gap, the odds will favor a new all-time high. If they cannot, the odds favor another leg down to the monthly moving average, and possibly down to the October low.
Best Forex trading strategies
Yesterday was a strong day for the Euro, but climactic, and it has been in a pullback overnight against all other Forex markets. Also, it was oversold on the 60 minute chart, and a reversal up was likely. As big as the rally was yesterday, it was not big enough to give any useful information to those trading Forex for a living. Traders learning how to trade Forex markets can see that the EURUSD is still in a trading range on the daily chart, and it might be forming a triangle. Whatever name a price action trader wants to use does not change the reality that it is in breakout mode and it has not yet broken out. There is a 50% chance for either up or down.
The rally on the 5 minute EURUSD chart was strong enough for Forex day traders to expect its high to be tested. However, the bulls need a strong breakout above that high. The bears will try to create a double top there. The best Forex trading strategy is to look for the EURUSD to work back up to yesterday’s high today or tomorrow. Although there has been a weak rally overnight, it was not as strong as the selloff from yesterday’s high and the bears might get one more leg down first. When the price action is confusing, a trading range is most likely. The candlestick pattern is the same in the other Euro Forex crosses.
There is a breakout in the EURCAD that is strong enough for a 2nd leg up after a pullback. It is testing yesterday’s high.
The dollar was quiet overnight. There is a breakout on the 5 minute USDCAD chart right now. The bulls need follow-through buying, or it will simply create a double top with yesterday’s high. The GBPUSD is also having a small bull breakout this morning.
Forex trading for beginners will probably be limited today. They should look to enter on pullbacks after strong breakouts, if any form, or to enter on reversals in trading ranges, especially if there is a 2nd signal with a good signal bar.
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.
