Trump corporate tax cut weak Emini rally continuing, despite buy climax
I will update around 6:44a.m.
The Emini gapped up and began with a pair of strong bull bars. This makes a bear trend day unlikely. The odds now favor either a bull trend day or a 1 – 2 hour trading range. If there is a trading range, the bulls will buy a sideways pullback to the moving average, which usually is a double bottom of wedge bull flag. The bears will try for a double top or wedge top and then a reversal down.
The bears will probably need at least a micro double top or a parabolic wedge top before they can get a swing down. This reduces the chances of a swing down beginning within the 1st few bars. Most bear trend days that follow big gaps up have several big bear bars in the 1st hour. Without that, the odds favor a bull trend day or a trading range day.
At the moment, the day is in a strong bull trend.
Pre-Open market analysis
The Emini on Friday pulled back from Thursday’s big breakout above a 3 week bull flag. Yesterday went above Friday’s high and therefore triggered a buy signal on the daily chart. Yet, Friday had a bear body and was therefore a weak buy signal bar. Yesterday was a small day and, consequently, a weak entry bar. The daily chart is in a bull trend.
Last week was a pullback on the weekly chart. It is therefore a buy signal bar for this week. Since it was a doji and 3 of the past 4 week’s were dojis, it is not a strong buy setup. This reduces the odds of a strong rally from here on the weekly chart. Yet, the bulls want a break above last week’s high and then a new all-time high.
Even though the daily chart has been mostly sideways for a month, the odds continue to favor at least slightly higher prices. With Friday and yesterday both being small, and the holiday coming, the odds are against a big move up or down. Yet, a breakout to a new high or a strong reversal down can come at anytime. While unlikely today, traders will not be in denial if one happens. They will trade the strong breakout for a swing trade. More likely, today will be another mostly quiet, trading range day. I wrote this before the overnight rally.
Overnight Emini Globex trading
Yesterday was a entry bar for the bulls who see Friday as a pullback from Thursday’s bull breakout above a 6 day bull flag. The Emini is up 9 points in the Globex session. It will therefore probably gap up today. It may even gap above last week’s high, which would trigger a buy signal on the weekly chart. A big gap increases the chances of a strong trend day up or down. A big gap up makes a bull day more likely than a bear day. When there is a big gap up, the 5 minute chart is far above its 20 day EMA.
Many bulls do not want to buy too far above the average price. Consequently, a big gap usually leads to a trading range over the 1st hour or so. The bulls will try to create a double bottom or wedge bull flag on a sideways move to the moving average. The bears will try to create a double top or wedge top and then a bear trend day. Less likely, there will be a strong bull or bear trend that begins within the 1st few bars of the day.
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
Yesterday was a big bear day. The bears want another bear day today to increase the odds of a double top lower high with the October 12 lower high. The pullback is about 50% and at the 20 day exponential moving average. It is also in a support zone created by many prior highs and lows.
The EURUSD daily Forex chart reversed down from a test of the October 12 major lower high. The bears see last week’s rally as the 2nd leg up in a double top with that high. They got a strong reversal down yesterday, but is was small compared to last week’s big bull breakout. In addition, it is around a 50% pullback from the 2 week rally. Furthermore, it is in an area of several prior highs and lows. This is therefore a support zone. The bears need more or bigger bear days this week before traders will believe that this 4 day selloff is a bear trend and not a pullback from last week’s bull trend. A big breakout below the November 7 higher low would probably lead to a new leg down, possibly to the 1.1300 area around the July 5 pullback low.
The bulls want a higher low and a 2nd leg up. The odds are that the 6 day rally was strong enough to make that likely. The depth of the 4 day pullback is more consistent with a continuation of the 4 month trading range than a higher low that will lead to a break above the 4 month trading range. The bulls 1st need a strong breakout above the October 12 major lower high before traders believe that the yearlong bull trend might be resuming.
The lack of follow-through buying and selling make the legs up and down more likely just part of the 4 month trading range. There is no evidence that the range is about to end. Consequently, it is more likely to continue for at least a few more weeks.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight after some minor follow-through selling. Today is the follow-through day from yesterday’s bear trend bar. Yesterday was not especially big, and today is even smaller. Since this 4 day selloff does not look like the start of a bear trend and it is now in a support zone, today is probably not going to be a big bear trend day. It will probably disappoint the bears who are hoping for a strong reversal down.
Consequently, it will probably remain a small day and day traders will plan to scalp. However, the bulls will try to create a buy signal bar today or tomorrow. If they get it, the want a 2nd leg up from this the 2 week rally. That means that there is an increased chance of a bull trend day at some point over the next few ways.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped up and rallied to a new all-time high in a tight bull channel. A parabolic wedge top led to a 5 hour tight trading range.
Today was a strong bull trend day. The bulls want trend resumption up after today’s 5 hour trading range. The bears want a trend reversal down. The breakout was strong enough to make at least a small 2nd leg up likely. Tomorrow and Friday have an increased chance of being small trading range days because of the Thursday holiday.
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.
