Posted 7:11 a.m.
The Emini broke about above yesterday’s high and the top of the bull channel from yesterday on the first bar, but the follow-through was disappointing for the bulls. This increases the chances of a trading range day. The bears tried to reverse the Emini, but the selloff stalled at yesterday’s high after just 2 bars. This is disappointing for the bulls and for the bears, and it is therefore a trading range open. It increases the chances that today will have a lot of trading range price action. This will make traders more inclined to scalp and less willing to swing trade.
The Emini tries to create a swing trade in the first hour. There is not yet a reliable stop entry setup for swing trading up or down. The reversal down from yesterday’s high is a possible high of the day, but the bears will need either a 2nd entry top or a strong bear breakout with follow-through.
The follow-through for the bulls after the first bar was also bad. They will also need either a 2nd entry setup or a strong bull breakout with follow-through. Until then, this is a trading range. The Emini is Always In long, but the probability is not much more than 50% until the price action gives us more information.
My thoughts before the open: How to trade futures online while in breakout mode
The Emini reversed up yesterday after a small pullback. The tight trading range of the past 6 months is getting tighter, and the daily Emini futures contract is at the apex of an ascending triangle. The odds are that the Emini will breakout to a new all-time high within the next week or two. However, when the candlestick pattern is a triangle, and it forms late in a bull trend, it usually becomes the final flag before a reversal. The tight trading range is present also on the monthly chart. A reasonable minimum correction if TBTL (Ten Bars, Two Legs) sideways to down, but on the highest time frame that has the pattern. Traders learning how to trade the market can see that this is the monthly chart, which means that the sideways to down move might last a year once it begins.
Yesterday reversed up strongly, but did not reach a leg 1 = leg 2 measured move projection. The Emini futures contract is up in the Globex session, and will probably open with a gap above the target. (By the time I finished writing this report, it sold off back to yesterday’s close). The next important target is the all-time high. Since the days have been small and that target is about 25 points above yesterday’s close, the Emini futures contract probably will not get there today, but it might. Another important target is the lower high at 2113.50. The bears can argue that the trading range is actually the early stage of a broad bear channel. However, if the Emini rallies above the most recent lower high, the bear argument ends and the bears will have to start over in their attempt to create a credible reversal candlestick pattern. Instead of a broad bear channel, the Emini would be back in a trading range in search of a breakout.
Yesterday ended Always In long and today will probably gap up. However, every attempt to breakout of the trading range has failed. Bears will look for an early reversal for a swing down from what they hope will be the high of the day. Bulls will hope for a bull trend day. The day could begin as a trend from the open bull trend, or have a pullback to support and then create an opening reversal for the low of the day. When the market is in a trading range on the higher time frames, it tends to spend a lot of time in trading ranges on the 5 minute chart, and that is likely today. However, with the gap up and the test of last week’s lower high, today will probably have a swing up or down starting in the first hour.
Forex trading strategies for today: Look to swing trade the EURUSD bull breakout
The EURUSD had a strong enough breakout at 5:30 a.m. this morning to make traders expect a 2nd leg up after any pullback. However, the bears want this rally to fail to get above last week’s high and then turn down from a lower high major trend reversal. The dollar had a bear breakout against all currencies on the report and will probably have additional selling after any pullback. This should create an opportunity for a 2nd leg, and it might be a good setup for Forex trading for beginners.
The GBPUSD is in a wedge top on the 60 minute candlestick chart and it is transitioning into a trading range. Traders who are trading Forex markets for a living have been selling new highs, and will soon start to sell lower highs, expecting at least 2 legs down on the 60 minute chart. Although it rallied on the report this morning, the Euro is stronger, and traders looking to buy against the dollar will probably choose the EURUSD instead.
The AUDUSD is also strong, but the big breakout on the report is late in a bull trend on the 60 minute chart. This increases the chances that it is a buy climax that could correct down over the next day or two.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed down on the open and spent most of the day within a trading range.
The Emini reversed down after the 1st bar and spent most of the day in a trading range. Nothing has changed…the Emini is deciding whether to break to a new all-time high, or to give up and reverse down. Until the Emini decides, most of the trading will continue within trading ranges.
Forex price action for tomorrow
The reversal up in the EURUSD had good follow-through, as I expected. The rally stalled at last week’s high and the market went sideways into the close. The rally was strong enough to test up after this pullback, but that might happen tonight instead of tomorrow.
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.
Thank you Al — these daily reviews are always very useful and I appreciate your work.