Trump rally contributing to January barometer
Updated 6:44 a.m.
The Emini had a small gap up and broke to a new all-time high. The 1st 2 bars were big bull bars closing near their highs. This makes either a bull trend day or a trading range day likely. If today is a trading range day, it could pull back below yesterday’s high before finding a bottom.
The bears want the early rally to be a buy vacuum test of the 2700 Big Round Number. They want a parabolic wedge top and early high of the day. They will need either 3 consecutive strong bear bars or an Endless Pullback to convince traders that today will be a bear trend day.
At the moment, the Emini is Always In Long. Yet, the bears are trying for the parabolic wedge top.
Pre-Open market analysis
Yesterday’s gap up and late rally reversed Friday’s selling. The daily chart is still in a bull trend. Therefore, the odds continue to favor higher prices. Yet, there have been many bear bars in the tight trading range of the past 3 weeks. This is a sign of selling pressure. In addition, the buy climaxes on the daily, weekly, and monthly charts are the most extreme in history. Therefore the odds favor a 5% correction beginning soon. The bulls know this as well, but will keep buying until there are consecutive big bear days.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex market. It might therefore gap up to a new all-time high. The bears want a double top with the all-time high of 2 weeks ago. That high is also the top of a 3 week trading range. Unless the bulls get a strong breakout above the range today or tomorrow, yesterday’s rally will probably fail and the 3 week trading range will then continue.
Yesterday’s reversal up was strong enough to lead to higher prices for a few days. This increases the odds of bull trend days. Nine-five percent of all bull trend bars on the daily chart have a visible tail on the bottom. This is almost always caused by an early selloff that reverses up. Consequently, the bulls will look for a reversal up from an early selloff. In addition, they know that there is an increased chance of a bull trend day, and therefore will be ready to swing trade.
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 bears want a wedge rally to a double top. Yet, the 4 consecutive big bull bars are strong enough so that the bulls will buy a test of the November 27 high.
The 4 day rally is testing the top of the 6 month trading range, which is the bottom of a 15 year trading range. Since the 4 day rally has been strong, the bears will probably need at least a micro double top to create a reversal down. More likely, the 1st pullback will become a bull flag and the bulls will again try to get the breakout. Since the EURUSD daily chart is in a trading range, pullbacks usually fall below support. Therefore, the pullback will probably reach the November 27 high within a week.
The bears hope that the 4 day rally is just a buy vacuum test of resistance. They see a wedge rally from the October 6 low and a double top with the September 8 high. Because the momentum up is strong, the bears will probably need at least a micro double top before they can get a reversal down from the resistance at the top of the 5 month range and at the bottom of the 15 year trading range above. Consequently, the downside risk is to around 1.1950 over the next week.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart pulled back about 70 pips from yesterday’s high in a broad bear channel. The bulls are searching for a bottom of what they see as a pullback on the daily chart. However, the 4 day rally to resistance has been climactic. Consequently, the odds favor a trading range over the next few days.
Because the momentum up has been strong over the past week, the bulls will scalp and swing trade. Many will wait to swing trade until after at least a couple legs down from yesterday’s high and a test below the November 27 high. Alternatively, they will wait for a strong breakout above the top of the 5 month trading trading range.
Since the bears know that a trading range is likely over the next few days, day traders will sell rallies for scalps.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied from the open and formed a trend from the open bull trend. The open remained the low, which is unusual. The Emini ended with a wedge bull channel.
The Emini gapped up and the open remained the low of the day. That happens only about once a year. The Trend From The Open bull trend ended with a wedge bull channel. That makes an early trading range likely tomorrow.
This is the 2nd day of a strong reversal up. The odds therefore favor at least slightly higher prices. However, the odds are that the 3 week tight trading range will be the Final Bull Flag on the daily chart. This means that this rally will probably get pulled back into the range within a week or two.
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.
