Posted 7:00 a.m.
Although there was a big gap up and follow-through buying, there were bear bars after the bull bars and the Emini is far above the moving average. This makes it likely that the opening rally will become a bull leg in a trading range. The Emini might test down to the low of the day and the moving average. Equally likely is that it will simply just go sideways for an hour or two until it is closer to the moving average.
Since the Emini is at the top of its 3 month trading range, the bears still have a chance at forming a bear trend day. It could do it with one more push up to a parabolic wedge top, or by simply having a strong bear breakout made of one to two big bars, or 3 or 4 smaller consecutive bear bars. Finally, if the Emini enters a trading range, there might be a major trend reversal.
At the moment, the Emini is always in long, but the odds of a swing down beginning within the first hour are at least 50% because of the bear bars following the bull bars at resistance areas (the open of the week and the March and February highs). Bears will be ready to short if the Emini reverses down from a parabolic wedge top within the next few bars.
Less likely, this will be a trend from the open bull and rally to above the high of the week and to a new all-time high. At the moment, the upside is probably limited because the Emini is already up 23 points and near the top of the trading range.
My thoughts before the open: Trading price action after a gap up
The S&P Emini futures contract is up in the Globex session after the unemployment report and the Emini day session will probably open with a gap up. The day trading strategy will be to look for a trend day up or down. Traders learning how to trade the markets should know that when there is a big gap, the market usually goes sideways for about an hour until it gets closer to the moving average. However, it can have a swing up or down from the first bar, and if there is an early signal bar, it can set up a good swing trade.
For online daytraders looking for bullish candlestick patterns, a trend from the open bull trend without a test down sometimes happen, but is less common than some kind of double bottom. For example, there might be a 5 point rally, and then a pullback to test the low and the moving average.
The bear swing traders want to see a strong bear candlestick pattern on the first bar, and then they want a strong entry bar and follow through. Without that, the best they can reasonably hope for during the first hour is a trading range.
Today is a Friday so daytraders will pay attention to weekly support and resistance, especially in the final hour. The open of the week was 2107, which is also around the high of the 3 month trading range.
Forex trading strategies
After the unemployment report, the Forex markets have had reversals up and down and are close to unchanged at the moment. The problem that the EURUSD bulls have is that yesterday turned down from a breakout above the top of a month long micro channel, and the micro channel was probably a bull leg in a trading range. The odds are that this Forex price action is a buy climax and that the online currency traders expect a pullback or tight trading range on the daily chart for at least 5 bars. This could make Forex scalping the best strategy for several days. Today’s early reversals with big bars also increases the chances for a lot of trading range trading for traders learning to trade Forex markets for a living.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The S&P Emini futures contract had a big gap up, but then a quiet trading range day, closing near the open of the week.
The Emini had an early small pullback bull trend, but the bear microchannel down from the high of the day was enough selling pressure to keep the Emini sideways all day. It closed just above the open of the week, and created a doji candlestick pattern on the weekly chart. The weekly chart of the Emini is in a 3 month tight trading range.
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.
Hi Al,
I find parabolic wedge and 3 pushes for MTR is very subjective. A lot of MTR parabolic wedge and 3 pushes fails, and the market continues to push through even during a buy or sell climax.
Most tops and bottoms fail. However, all trends eventually end, and when there is a strong open and possible consecutive buy climaxes, traders need to be thinking about a possible parabolic wedge top. I talked about this in the trading room today and at the end of the day. Bears were disappointed by the tail on the entry bar after the 7:15 a.m. parabolic wedge sell signal, and most bought back their shorts over the next few bars. If the top was good, the bears should have been able to get 3 or more consecutive bear bars. I think it was a good short, and the Emini gave traders plenty of time to get out breakeven or with a few ticks profit.