Emini ioi bull flag in buy climax before Trump’s tax reform and cut
Updated 7:05 a.m.
The bears got an early, strong break below yesterday’s low. They closed Friday’s gap up, which is now an exhaustion gap. The Emini is Always In Short. However, the bears need follow-through selling to convince traders that the selloff is not just a sell vacuum pullback test of the measured move target on the daily chart.
The initial selloff is strong enough to make a bull trend day unlikely. Yet, the follow-through selling has been weak. Therefore, the day is not yet strongly bearish. At the moment, the day will probably be either a bear day or a trading range day. The bulls would need a strong reversal up to convince traders that they can take control and get the market far above the open. They want the 3 day selloff to be a high 2 bull flag on the 60 minute chart.Unless the bears get much stronger selling, the odds favor a lot of trading range trading.
Pre-Open market analysis
Yesterday was an inside day after Monday’s big outside day. That makes yesterday and ioi (inside-outside-inside) breakout mode setup. Yesterday is therefore both a buy and sell signal bar. The bulls will buy above yesterday’s high, thinking it was a pullback from Monday’s rally. The bears will sell below yesterday’s low since they see it as a 2nd entry sell at a new high (last week’s small wedge was the 1st).
Because the daily chart is in a bull trend, the odds favor higher prices every day. However, since the weekly and monthly charts have historically extreme buy climaxes, the odds favor a 5% correction before the Emini goes much higher. The bears need a strong reversal down and strong follow-through selling before traders believe that the daily chart is beginning to correct. If they get it this week, the weekly chart will have a big outside down bear bar. That would increase the odds of the start of a pullback.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex market. The daily chart had a credible top last week. There was a small wedge after a buy climax. The bulls broke above, but the follow-through has been bad. This is a consecutive credible top. Since the weekly and monthly charts have never been this overbought, day traders will be ready to swing trade because there is an increased risk of a series of big bear trend days beginning over the next week. If the bears fail, then the odds favor at least one more small leg up.
Since yesterday formed an ioi breakout mode signal, the bulls will try to break above yesterday’s high to trigger the buy. In addition, the bears will try to trade below yesterday’s low to trigger the sell. Since yesterday had a bear body, the odds are slightly greater that the bears will get their sell today. However, yesterday was a doji day with prominent tails. This is a weak buy or sell signal bar. Consequently, it is more likely that there will be buyers below and sellers above, and the Emini will go sideways for another day or two.
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 daily EURUSD Forex chart has had 3 consecutive small days. It is at the apex of a 4 week trading range that is near the bottom of a 3 month trading range.
The EURUSD daily Forex chart is at the apex of a tight trading range. This is a breakout mode pattern within a 3 month trading range, which is a bigger breakout mode pattern. Because the 20 week exponential moving average is just below the 3 month range and it is a strong magnet, the odds are that the chart will go sideways to down to the average over the next several weeks. Since the weekly chart is in a strong bull trend, the bulls will buy the pullback to the average. Consequently, the downside over the next month or two is not great.
Even if the bears get a strong break below the head and shoulders top, the selloff will probably only be a bear leg in a big trading range. The bulls would buy the selloff since the weekly trend is so strongly bullish. Consequently, the odds are that even a deep selloff will lead to at test back up to the 1.2000 area again.
Overnight EURUSD Forex trading
The 5 minute chart has been in a 30 pip range overnight. In addition, this is the 3rd consecutive small day. Because the daily chart is at the apex of a tightening range, there probably will be a breakout within a week or so. Yet, until there is a breakout, day traders will continue to just scalp.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini fell below yesterday’s low and last week’s low, but reversed up strongly from the daily moving average.
The Emini triggered the sell signal on the daily chart by breaking below last week’s low. In addition, by trading below last week’s low, it formed an outside down week on the weekly chart. However, the Emini rallied strongly in the 2nd half of the day, reversing most of the selling. Friday’s close will be important. The bears need a close near or below last week’s low to increase the chances that a correction is underway. Without it, the bulls are still in control.
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.
