Posted 7:06 a.m.
The Emini opened with multiple reversals after yesterday’s buy climax. This is trading range behavior, which is typical after a buy climax. The rally yesterday was big enough so that there probably will be swing trades within the trading range, but at the moment, a trading range is most likely for the first hour or two. The bulls still want a test of the 60 minute lower high at 2061.
The Emini triggered a high 3 buy on the 7 am report. This is a wedge bull flag and a higher low. This is a possible low of the day, but the initial two-sided trading might limit the rally to a swing within a big developing trading range. The bears need to do more for this to become a bear trend day. However, if the Emini reverses down with follow-through, the selloff that began at yesterday’s high could continue. The bears are trying to keep the market from getting above the moving average so that they can create a bear trend. At the moment, the Emini is always in long, but it has not yet broken out strongly enough for the bulls to believe that this is more than a bull leg in a big trading range.
My thoughts before the open: Buy climax that is testing resistance
Today is Friday so traders have to be aware of weekly magnets. The two closest ones are the highs of the past 2 weeks. Last week was a buy signal bar and its high is 2051.75. The high of the prior week is 2061, and that high is an important lower high on the 60 minute chart.
Yesterday ended with a buy climax that is testing resistance at the 60 minute lower high from 2 weeks ago. The rally at the end of the day was strong enough to get some follow-through in the first hour or two. It looks like it will test that lower high. It is too early to know whether it will break above it, or form a large double top bear flag. Since yesterday was a buy climax, the odds are that the Emini will enter a trading range within the first 2 hours today.
If there is a breakout above that small bull flag from yesterday’s close, it could lead to a final flag reversal, and then a big trading range. Less likely, the Emini will break strongly above that 60 minute lower high and have another big bull trend day. It could also reverse down strongly, but the rally was so strong that a big trading range is more likely.
Summary of today’s price action and what to expect tomorrow
The Emini was in a trading range and weak bull channel for the first 4 hours. It then broke below the neckline of the double top major trend reversal and fell for more than a measured move down. The bulls tried to hold above last week’s high because the candle on the weekly chart last week was a bull flag buy signal. However, they failed at the end of the day.
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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.
