End of day comments about today’s Emini price action and day trading
The Emini reversed up from below last week’s low, but every bull bar in the rally to the 60 minute moving average had bad follow-through. This price action made a trading range likely. After a trading range with two big legs down, the Emini had a trend resumption up to a new high above the 60 minute moving average.
S&P500 Emini intraday market update for price action day traders
Posted 7:35 a.m. PST.
The Emini opened with a big gap down to below the bottom of the month long trading range and the bottom of a 2 week bear channel. As expected in this context, it immediately reversed up and closed the gap, creating a bull trend reversal for day traders. However, the buy signal bar and entry bar were weak, and so was the follow-through. This was trading range price action and it might be a sign that trading range psychology will dominate the day.
The big bull trend bar at 7:20 a.m. PST probably will control the price action for the next couple of hours. The follow-through was weak, but the bar was strong enough so that traders will look to buy pullbacks. The market has rallied 10 points above the open and that makes a bear trend day unlikely. Since today will therefore either be a bull trend day or a trading range day, traders will look to buy pullbacks. If selling pressure increases, they will also sell rallies.
Before the open comments on S&P500 Emini 60 minute, daily, weekly, and monthly candle charts
The Emini bears twice last week tried to get a downside breakout of the month long trading range, and both attempts were followed by a reversal up on the next day.
I mentioned in the trading room on Tuesday that the 60 minute chart might create a right shoulder of a head and shoulders top if it rallied. The Emini rallied only one day and then broke to the downside. I said that this was terrible symmetry since the left shoulder of the pattern lasted several weeks. When a pattern does not look quite right, the probability that it will work is less.
The Emini made a 2nd strong attempt to break below the trading range on Thursday, but this was met with strong buying on Friday. Whenever a market disappoints traders, it is usually in a trading range. The selloff from the all-time high of two weeks ago is therefore more likely a bear leg in what will become a big trading range, and less likely the start of a bear trend. A reasonable initial target for the bears is the August low around 1900.
Most bear channels become trading ranges, and bulls therefore see them as bull flags. The bulls hope for a bottom within that range and then a resumption of the bull trend. Just like the bears need follow-through from their downside breakout, if the Emini breaks above the September high, the bulls will need follow-through as well. Without it, breakouts up and down will just enlarge the height of the range and not lead to a trend.
See the weekly update for a discussion of the weekly chart.