Growing Emini parabolic buy climax before tax reform
I will update around 6:52 a.m.
The 5 minute chart had a small wedge top at the end of yesterday. That was nested inside of a 2 day wedge. The odds therefore favor some sideways to down trading today. Yet, the wedge bull channel was very tight. That therefore makes an immediate bear trend unlikely. Therefore, the best the bears can probably get is a pullback on the 6 minute chart.
The odds are that the bulls will take profits around yesterday’s high. Consequently, today will probably have at least a small swing down. It might even be a bear trend day. However, the rally has been strong enough to make a big bear day unlikely. Because of the nested wedge buy climax, a bull trend day is unlikely as well. Consequently, traders will probably get at least a couple hours of sideways to down trading today.
At the moment, the Emini is reversing down from below yesterday’s high. Since yesterday’s range was small, there is a 50% chance that today will fall below yesterday’s low. The follow-through bar was a doji bar instead of a big bear bar. In addition, the 2 day channel has been tight. Consequently, a strong bear trend is unlikely. Since there is a nested wedge top, a strong bull trend day is also probably not going to unfold. That leaves traders with a probably trading range day. It is now deciding whether it is near the top or bottom of the range.
Pre-Open market analysis
Yesterday was another small pullback bull trend to a new all-time high. The 60 minute, daily, weekly, and monthly charts are all in strong bull trends. While they are also in buy climaxes, there is no top yet. The bears will probably need at least a micro double top before they will get a reversal. Even then, the bull trends are so strong that the bulls will buy the 1st reversal down.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex market. Because the 4 day rally has been extremely strong, the best the bears can probably get over the next few days is a day and a half of sideways to down trading. The bulls will buy the selloff.
Since the buying has been extremely climactic, the odds favor some profit taking within the next few days. This means that the daily chart will probably have a bear bar soon, and a bar that falls below the low of the prior day. Consequently, there will probably be a swing down on the 5 minute chart, and probably a bear trend day soon. In addition, it could be very strong. Yet, the odds are that it will not last more than about 10 bars on the 60 minute chart. This means about a day and a half.
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 market trading strategies
The EURUSD daily Forex chart has been in a tight trading range for 6 days. In addition, it is at the bottom of a 2 month trading range.
The EURUSD Forex chart has sold off for a month. The 6 day tight trading range is a loss of momentum for the bears. In addition, it is at the support of the August 17 major high low, which is the current bottom of the range. While the bulls want a rally from above that low to maintain the bull trend, the 2 month trading range makes it more likely that the bears will break below. Yet, the bulls now have a double bottom, a micro double bottom, and a wedge bull flag. They therefore might get a 50%, 200 pip rally to a lower high before the bears get below that low.
Whether or not the bears break below the low before or after a 200 pip bounce, they have a 40% chance of a measured move down to the July 5 low. Hence, there is a 60% chance of either continued sideways trading or a another leg up above the September high.
Even if they get their selloff, the rally on the monthly chart is strong enough to get a 2nd leg up. Therefore, they will see the selloff as a breakout test of the top of the 2 year trading range. In addition, it would be a 50% pullback of this year’s rally. Consequently, the odds would favor a test back up to last month’s high within the next several months.
Overnight EURUSD Forex trading
The 5 minute chart has been in a 40 pip range overnight. In addition, it is in a 6 day range where the bulls have a double bottom and the bears have a double top. The chart is therefore in breakout mode. However, because this is at the bottom of a 2 month range, there is a 60% chance of a rally whether or not there is one more push below the August 17 low. Consequently, day traders are looking for strong bull setups for a 200 pip rally. The bears know that the odds are against a strong break below the 2 month range, but if there is one, they will swing trade shorts. Otherwise, they will wait for a 200 pip rally before swing trading again.
Since the 6 day range is small and the legs are small, day traders are continuing to scalp. They will continue to scalp until there is evidence that the bottom is in, or, less likely, that there will be a strong bear breakout.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini broke above a wedge top, but then had a parabolic wedge top. Consecutive complex tops have a higher probability of ending a trend. The day became a trading range day.
Today rallied to another all-time high, but had consecutive complex tops. After a wedge top and then a parabolic wedge top, the Emini sold off back below the top of the lower trading range. It then ended up as a trading range day. While the bull trend on all higher time frames is strong, it is climactic. Therefore the Emini will probably begin to go sideways for several days.
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.
