Posted 7:07 a.m.
Today opened with a limit order market. Support was the moving average and resistance was at the two lower highs from yesterday. The bulls needed a breakout above the lower highs to end the bear channel. The bears want the channel to continue, but need a new low in addition to the lower highs.
The Emini has been sideways just below resistance for several days. With today’s limit order open, today is likely to be mostly sideways again. However, it will still probably have a 2 – 3 hour swing up and down. The market is in the process of deciding which will come first.
Pre-Open Market Analysis
S&P 500 Emini: Learn how to trade a bull flag
The Emini was likely to pull back from its test of the September high for 1 – 3 days, and then try to test up again. Yesterday was the 2nd pullback day. Traders who trade the markets for a living know that if the pullback has 3 consecutive bear bars closing below their midpoints, the odds are that the pullback will fall for about a measured move down and last 5 – 10 days. This means that today’s close is important. At a minimum, the bulls want a close near the high of the day. Then the 3 day pullback would be a bull flag and traders who are learning how to trade the markets should look to buy tomorrow if it rallies above today’s high.
The bears want today to have a close below the middle of the range. They prefer that today is a big bear trend day, which would make it likely to be followed by several more days down. The bears especially want tomorrow to close near last week’s low, totally reversing the bullishness of last week’s rally. This means that tomorrow’s close is also important. Will the bulls get a strong follow-through candlestick pattern on the weekly chart, increasing the chances the the bear trend has ended? Will the bears reverse last week’s rally, increasing the chances that the 2nd leg down in the bear trend has begun? Or, most likely, will both the bears and bulls be disappointed, which is most common when more trading range price action is probably.
The Emini is up 11 points in the Globex market. The bears want a double top lower high major trend reversal on the 60 minute chart, and then a selloff into tomorrow’s close. The bulls want a breakout above yesterday’s high because that would be an entry for a bull flag buy on the daily chart. They do not mind if instead today is small bull day as long as the buy signal then triggers tomorrow. Because of the uncertainty, the odds are that there will be a lot of trading range price action today. As always, if either side has a strong breakout with strong follow-through, online day traders will swing trade. Without that, they will be quick to take profits, and look to buy low and sell high.
Forex: Best trading strategies
The EURUSD tested the September 18 lower high yesterday. The breakout failed and reversed down strongly overnight. It began a strong 2nd leg down on the 5 minute chart a few minutes ago. Because the 60 minute chart has been in a broad bull channel for the past 3 weeks, and the reversal began after the 3rd push up from the pullback after the October 2 breakout (a spike and channel bull trend), and the overnight reversal was strong, the odds are that there will be at least 2 legs and a measured move down over the next few days. Bears will sell for any reason, and they will especially be eager to sell the 1st pullback in the bear swing, since the odds of a 2nd leg down at the moment are about 60%.
The 60 minute chart of the USDCAD was in a tight bear channel for about a week, and it is now in a broad bear channel. Bulls will be increasingly willing to buy because they know that the odds are that the bear channel will transition into a trading range over the next few days.
The 60 minute chart of the USDJPY broke below the trading range of the past 2 months. However, it had consecutive big sell climaxes, with the 2nd one ending about an hour ago. The odds are that it will go sideways to up for at least a day or two.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I left 10 a.m. today, and I will be at the Traders Expo today and tomorrow so no more updates until Monday.
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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, and a 2 day free trial is available.
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.
