Posted 7:45 a.m.
The Emini reversed up from below yesterday’s trading range, but there was no immediate follow-through buying. The bears wanted an opening reversal down from the moving average. This is a trading range open, and since yesterday was also a trading range, it increases the chances of a lot of trading range price action today.
There is usually a swing trade that begins within the first hour or so, and swing traders wait for a strong breakout in either direction with follow-through. Until then, limit order traders are trading for 1 point scalps, buying below bars and selling above.
At the moment, the Emini is breaking above the moving average and to a new high of the day after forming a double bottom bull flag. It is Always In long and will try for a test of the all-time high. Since so much of the price action today has been disappointing and yesterday was in a trading range, the odds of a strong trend up or down today are small. This means that any leg up or down will probably end up as a leg within a trading range day.
My thoughts before the open
Today is Friday so weekly support and resistance are magnets. The nearest targets are last week’s high and this weeks high (the all-time high) and low. The bears failed yesterday, and that makes it unlikely that the weekly candlestick pattern will be a bear reversal bar today. In the Globex session, the Emini sold off on this morning’s report. This makes it unlikely that the weekly candlestick pattern will be a strong breakout bar.
Traders learning how to trade the Emini for a living should sense that there is something wrong about the breakout above the 4 month trading range. It lacks big consecutive bull trend bars on both the daily and weekly charts, making the breakout a weak price action pattern, and increasing the chances that the breakout will fail.
With the S&P Emini futures contract just below its all-time high, the intraday trading strategy is to be ready for either a strong breakout up or a strong reversal down. However, since the Emini is within both a weak bull channel and a trading range on the daily charts, most of the trading has been within trading ranges every day. This means that although there will still be a swing trade or two every day, the swing trade will probably be limited and the high probability trading is to bet on a lot of trading range price action.
The 60 minute chart has been in a tight trading range with big dojis for 3 days. Although there is a wedge top at the new all-time high, there is no reversal yet, and the wedge could easily continue up for at least one more leg. When there is uncertainty, the futures trading strategy is to bet on continued trading range price action. Until there is a breakout, there is no breakout. With the selloff in the Globex session, the odds are against a big bull breakout today. With yesterday’s rally the odds are against a big selloff. This again makes trading range price action the most likely outcome today. As always, a trader learning how to become a day trader needs to be ready for a breakout in either direction.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini futures contract was in a small trading range today, and sold off to a new low at the end of the day.
The S&P Emini futures contract formed an ii on the daily chart, which is a breakout mode setup for Monday. Today was a small trading range day that closed near its low, and this increases the chances of Monday trading below today’s low and triggering a sell signal on the daily chart. However, with the Emini in a 5 day tight trading range in a 6 month trading range, the odds of a big trend day are small. The context is good, since it is forming a weak bull breakout, but until the trading range price action ends, daytraders should assume that it will continue.
Best Forex trading strategies: The candlestick pattern is a bear breakout in the EURUSD
Traders learning how to trade Forex markets for a living would notice that the EURUSD is in a bear flag on the 240 minute chart, but this is also at the bottom of a month-long trading range. This selloff is also testing the top of the April trading range The bears need a strong breakout below this support, and without it, the odds are that the breakout attempt will fail and this 240 minute bear flag will be the final bear flag before a bounce. Since last week’s selloff was strong, any bounce will find sellers at around the midpoint of the selloff. This means that the trading range will probably continue for at least a few more days, even if there is a bear breakout or a rally.
As I am writing, the dollar is breaking out on the 5:30 a.m. report and the breakout is strong enough so that there will likely be follow-through after the first pullback. However, since the EURUSD is at the bottom of a trading range and testing the top of another trading range, this selloff might end up being a sell vacuum test of support and an exhaustive sell climax. At the moment, it is strong enough so that the odds favor more selling this morning, and Forex trading for beginners should focus on looking to sell a bounce.
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.
Thanks Al.