Trump rally year end profit taking and tax cut vote
Updated 6:45 a.m.
Today had a big gap up, and none of the 1st several bars were big bear bars. That makes either a trading range or bull trend day likely. Since the 1st 2 bars were dojis, an early trading range is likely. In addition, the Emini will probably find support below around the 60 minute and 5 minute moving averages. Bulls will look for a double or wedge bottom up from support within the 1st hour.
The bears need several strong bear bars and a strong break below the 60 minute moving average. That is unlikely. Therefore today will probably be either a bull trend day or a trading range day. Because most reversals lead to trading ranges, the odds are against a strong bull trend. However, the bulls will try to get above yesterday’s high because it had a ledge top.
Pre-Open market analysis
The Emini triggered a sell signal on the daily chart yesterday. Yesterday had a decent bear body and was therefore an okay entry bar. However, the sell came after 5 consecutive bull bars. It is therefore more likely setting up a minor reversal. Yet, if the bears get 3 consecutive bear bars, they will have reversed last week’s rally. This would increase the odds of lower prices.
Today is Friday and therefore weekly support and resistance are important. If the bulls close today below Monday’s open, this week will form a bear sell signal bar on the weekly chart.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. Yesterday’s selloff was climactic. That means that there is a 50% chance of at least 2 hours of sideways to up trading today. It has likely already begun.
Yesterday’s high on the 5 minute chart had 4 bars at exactly the same price. That is a ledge, which is a magnet. The Emini usually rallies to at least a little above a ledge top within a few days. While it might get there today, the Emini is more likely going to be mostly sideways until next week’s vote on Trump’s tax cut.
Toady will probably gap far above yesterday’s bear channel. That will create a Big Down, Big Up pattern. A reversal creates confusion and usually results in a trading range. Even if the bulls get above yesterday’s high, the odds are against a big rally far above that high. More likely, any breakout up or down will probably come after next week’s vote.
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 EURUSD daily Forex chart pulled back for 2 days after rallying up from a double bottom. The bears want a strong break below the double bottom. That would trigger a head and shoulders top. The trading range is likely to continue.
The EURUSD daily Forex chart has been in a trading range for a month. That range is in the middle of a 5 month trading range, which is in a 2 year trading range. It therefore always has both a reasonable buy and sell setup. Because the November rally was stronger than the December selloff, the odds favor higher prices over the next couple of weeks. Yet, there is no sign of a breakout up or down. Trading ranges constantly look like they are going to break out, but 80% of strong attempts fail.
The 2 day selloff is more likely a pullback from Wednesday’s strong bull day than a pull back in a 3 week bear channel. However, the odds of a test of the November 27 high before a break below the November 21 low are barely better than 50%. Until there are consecutive strong trend bars up or down, the odds continue to favor repeated repeated small reversal.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a weak 50 pip rally overnight. The rally looks more like a bull leg in a 7 day tight trading range than the start of a bull trend up to the November high. The chart is waiting for a catalyst before breaking out up or down. An obvious one is next week’s vote on Trump’s tax cut. Unless there is a strong breakout up or down today, Forex day traders will scalp.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini rallied strongly in a small pullback bull trend. It had a bigger pullback late, but the bulls bought it.
The Emini had a strong bull breakout in the 1st hour, and then follow-through buying. The odds are that there will be more follow-through buying early next week. However, the vote on the tax cut bill could lead to a big move up or down.
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.
For the new year Al would it be possible to also include the US Dollar in your daily analysis? It would help with the Eur as well.
Thanks.
I would love to include the dollar, bonds, crude oil, and some stocks, but my problem is time. I am already pushing as hard as I can, and I simply am unable to do all of the things that I would like to do.