Updated 6:44 a.m.
The Emini opened in the middle of Friday’s tight trading range. Hence, today’s open is a continuation of that range. In addition, the 1st bar had a big tail below and therefore was a trading range bar. The 2nd bar was a bull inside bar and therefore a buy signal bar for an Opening Reversal up from a test of Friday’s low. Yet, there were more seller’s above than buyers. This is a trading range open. Until there is a strong breakout up or down, the odds are that today will be another mostly sideways day.
Because Friday was small, there is an increased chance that today will trade above Friday’s high and below its low. If so, that would be an outside bar on the daily chart. Yet, the daily chart is in a tight trading range. Therefore, an outside bar has no predictive value, and the tight range typically continues.
Pre-Open market analysis
The daily, weekly, and monthly charts have never all had such extreme buy climaxes. While that means that a 5% correction will likely begin before the end of the year, there is no top yet. However, the bulls will probably be unable to break far above the all-time high. Bears have been making money selling new highs for a month, and they will probably do it again.
While Thursday was a big bull trend day, Friday was a small bear inside day. It was not the follow-through buying that the bulls need. Since the Emini daily chart is in a buy climax, Friday is a sell signal bar for today. Because the Emini has been in a tight range for a month, a break below Friday’s low is a low probability sell signal. The bears need consecutive big bear bars to make traders believe that they have taken control.
This month has been small and it has spent a lot of time around its open. The bulls want the month to close above the month next week. The bears want a sign that the rally is stalling. They therefore want a close near the open to create a doji bar, or a close near the low to create a bear sell signal bar. The Emini might stay around the open and then decide on the close in the final hour of the month.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. Yet, it sold off 10 points and reversed back up overnight. The bulls want this reversal up to continue in the day session. Since they view Friday as a pullback from Thursday’s breakout above a 3 week bear channel, they want Friday and today to be a 2 day bull flag. Therefore, they will try to make the overnight reversal up to lead to a new all-time high this week.
Friday was a tight trading range in the middle of a month-long tight range. The odds are that the month will continue small until it closes next week. Furthermore, this is a holiday week, which means that there might be less interest in trading. That additionally reduces the market’s energy and increases the odds of more trading range trading.
Since most days over the past few weeks had at least one swing, the odds are that today will as well. However, there were only a few strong trend day. Consequently, traders will look for another swing today. Up is more likely that down. However, the Emini will probably stay around the open of the month until the month closes next week.
Friday’s setups
Here are several reasonable stop entry setups from Friday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
Trump’s tax cut vote this week is catalyst
The EURUSD daily Forex chart has pulled back for 3 days from last week’s strong reversal up. The pullback has 2 small legs down and is therefore a High 2 bull flag. The odds favor at least a small 2nd leg sideways to up. Since the rally is stalling at the resistance of the October 12 major lower high it is likely just a bull leg in the 4 month trading rane.
The EURUSD daily Forex chart reversed up strongly last week from below the bottom of a 4 month trading range and a 3 month wedge bull channel. The low was also a test of the 20 week EMA in a strong bull trend on the weekly chart (not shown).Yet, there has been no follow-through buying for 4 days. This is disappointing for the bulls. This therefore makes makes the rally more likely to be just another leg in the 4 month trading range than a resumption of the yearlong bull trend.
Since the daily chart is in a trading range, breakouts typical fail and disappoint both the bulls and bears. The bears were disappointed bu the failed head and shoulders top. Trading ranges usually go above nearby resistance, but since breakouts fail, the reversal disappoints the bulls, just like bear breakouts reverse up and disappoint the bears.
Consequently, the odds favor a break above the October 12 major lower high, and then a leg down lasting a week or two. Trading ranges spend most of their time going sideways in the middle of the range. Hence, the odds are that the daily chart will continue sideways around where it is now for another week or two.
The bears want a double top lower high with the October 12 lower high. Even if they get a reversal down, it will probably be minor. This means just another leg in the range. While all trading ranges eventually breakout into trends, there is no evidence that is successful breakout up or down is imminent.
Overnight EURUSD Forex trading
The 5 minute chart sold off 80 pips overnight, but reversed back up to around the open. The rally was a reversal up from 2 legs down from last week’s rally. Pullbacks often end after a 2nd leg down. The bulls therefore want last week’s bull trend to resume. Yet, the 5 minute chart has been in a 140 pip range for 4 days. In addition, the overnight rally has pulled back over the past 5 hours. Consequently, the odds are that the 4 day range will continue today. Unless the bulls get a strong breakout today, traders will continue to scalp, as they have been doing for 4 days. The odds still favor a break above last week’s high and the October 12 lower high, but there is no evidence that it will happen today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The bears failed twice to break below Friday’s low. The Emini reversed up in a weak rally to above Friday’s high. It closed near the open and formed a small doji day on the daily chart.
Friday was a bear inside bar in a bull trend on the daily chart. It was therefore a weak buy signal bar. Today triggered the buy by going above Friday’s high. But, Friday was a small day and today was a weak entry bar. The odds are that the 4 week tight trading range will continue, but the odds also favor at least slightly higher prices. Most days this week will probably be mostly trading range days.
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.
