Posted 7:05 a.m.
Today opened with 3 consecutive bear bars, like the past 2 days, but it held above the moving average and reversed up in a bull opening reversal. The bulls want a leg 1 = leg 2 measured move up from yesterday’s rally. The bears want a failure at yesterday’s high.
As I write, the Emini is always in long and in a bull channel, but near the top of the channel, at yesterday’s high, the 60 minute moving average, and the low of last week. The bulls need a breakout above this resistance. The bears are hoping for a double top above yesterday’s high and then a measured move down. The bulls need a breakout. Because of the trading range start and the trading range price action of the past several weeks, today will probably not be a strong trend day, although it might have swings up or down, like most recent days.
Most days in the past month have had tight trading ranges within the first hour, setting up a breakout mode situation, and today might be the same. Until there is a clear breakout with follow-through in either direction, this will continue to be a limit order market with traders selling rallies, buying selloffs, and scalping.
Tomorrow’s unemployment report might be the excuse for the breakout from the 60 minute trading range, and today will probably do something late in the day to make the market neutral going into the end of the day.
My thoughts before the open: trend reversal or a bull flag
Nothing has changed. The market continues in its tight trading range on the daily and 60 minute charts after 10 consecutive bull trend bars on the daily chart, which is a buy climax. Those charts are in breakout mode and the market is choosing between trend reversal or a bull flag. While in this tight trading range, the 5 minute chart will probably continue to have small ranges and mostly trading range trading, although traders learning how to trade the markets have noticed that there have been at least a couple of swing trades a day.
When the Emini is within a range, traders should expect to be disappointed by the follow-through during every swing, and that is a good thing because it tells traders what is likely to happen…that the swings are part of a trading range and likely to reverse.
Until there is a clear breakout in either direction, with strong follow-through, this type of price action will continue. It offers fewer stop entries, and many signals are not as strong as traders want. That is the confusion part of trading range trading. More experienced traders are entering with limit orders, betting breakouts will fail, and they are scalping. Beginners should patiently wait for stop entries, or for strong breakouts, but still be prepared to take profits earlier.
Summary of today’s price action and what to expect tomorrow
The Emini had an opening reversal at the moving average, but failed to break out above the low of last week LLW and the 60 minute moving average. It had swings up and down, and was a trading range day.
The Emini has been in a trading range for a month with lots of trading range days. The 60 minute chart is in breakout mode. It has a double bottom bull flag and a lower high major trend reversal. It might be waiting for tomorrow’s unemployment report for the excuse to break out.
Tomorrow is Friday so weekly support and resistance can be magnets. The most important price all week has been last week’s low. Last week was a sell signal bar on the weekly chart, but it was only a doji and it followed a strong rally. This made a trading range more likely than a bear trend. This week is the entry bar for the bears. Traders cannot draw conclusions until the weekly candle closes tomorrow. At the moment, it is a doji bar, which is a weak entry bar following last week’s weak signal bar.
The low of last week is 2099.75, the open of this week is 2102.75, the low of this week is 2085.25, the high of this week is 2115.50, the high of last week is the all-time high of 2117.75, and the December high is 2088.75.
See the weekly update for a discussion of the weekly chart and for what to expect going into next week.
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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.
