Friday unemployment report breakout
Updated 6:51 a.m.
Today sold off on the open to below yesterday’s low. Bulls want an early low of the day and then a reversal to above yesterday’s high. That would trigger a 4 day Head and Shoulders bottom. Yet, bears want a measured move down based on yesterday’s range. While the 1st 2 bars were bear bars, the 2nd and 3rd were dojis. Therefore, the bears lack conviction. The bulls tried to reverse up, but were unable. They probably will need a 2nd entry buy if they are going to start an early swing up.
Because of the lack of energy, this will probably be a trading range open for the 1st hour or so. The Emini is Always In Short. Yet, the odds only slightly favor the bears because of the several dojis after the initial selloff. If the bears get their early swing down, this early hesitation and yesterday’s small range mean that today will probably still not be a strong bear trend day. The odds are that today will be mostly a trading range day.
Pre-Open Market Analysis
Yesterday was a small bull trend day where most of the trading was within a tight trading range. Therefore, the Emini might be waiting for Friday’s unemployment report before its next breakout attempt. As I have said many times, the odds are that the Emini will both rally to a new high and selloff to close the gap above the July 2015 high within the next 2 months. Yet, no one knows which will come first. Because the Emini has been in a tight range for 2 weeks, it is in Breakout Mode. Hence, the probability is the same for the bulls and bears.
Globex session
The Emini is down 4 points and near yesterday’s low. Because yesterday was a small day, today could easily be an outside day. It is in the middle of the 2 week trading range and therefore still in Breakout Mode. Tomorrow’s report is a potential catalyst for a breakout up or down. Today will probably be another trading range day or small trend day. As always, traders should always be ready for the unlikely outcome, which is a strong trend day.
Forex: Best trading strategies
The EURUSD 60 minute chart is continuing its pullback after the strong bull breakout 2 days ago. It is now near the bottom of the bull channel, which is support.
The EURUSD daily chart has been in a tight trading range for a month, and it is therefore in Breakout Mode. Hence, once it breaks out up or down, the target will be a 200 pip measured move, based on the height of the range. Because of the tight range, Forex day traders have been mostly scalping, and many enter mostly with limit orders. Yet, traders expect the breakout happen within the next 2 weeks. Therefore, Friday’s unemployment report is a reasonable catalyst, and traders should remain ready for the breakout.
Overnight Forex sessions
The EURUSD continued its weak 2 day selloff after testing the top of the strong bull breakout. Because the selloff lacks consecutive big bear trend bars and has many bull bars, it is more likely a bear leg in a developing trading range than the start of a bear trend. Since it is near the support at the bottom of the pullback immediately after the bull breakout, it will probably go sideways to up today. Hence, traders will see the pasts 3 days as a Breakout Mode setup going into tomorrow’s unemployment report.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
After gapping down and forming a tight trading range, the Emini reversed up strongly from that Final Bear Flag. The reversal up was also a Lower Low Major Trend Reversal. Furthermore, after the buy climax failed to break above the 3 day Head and Shoulders Bottom neck line, the Emini again entered a tight trading range. It therefore created a Trend Resumption/Trend Reversal Breakout Mode setup going into tomorrow’s report.
While the Emini reversed up strongly today, it stayed in the middle of the 10 day range. It is therefore neutral going into tomorrow’s unemployment report.
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
The sudden single bar bear breakout from the final flag in the morning was a surprise for me. At that point, E-mini still did not even touch the moving average. There was no follow through of the breakout bar either and the breakout immediately failed. Request you to share your thoughts on this.
Thanks