The Emini entered the day with a bull flag candlestick pattern before the Brexit vote. Limit order bulls and bears each made money on each of the 1st 3 bars. This increases the chances of trading range price action today. The Emini opened in the middle of yesterday’s sell climax at the moving average. Hence, more neutral price action. While a swing up and down will probably form today, it is too early to know which will come first. Traders are looking for a good buy or sell signal bar, or for a strong breakout with follow-through.
The 1st target for the bears is the bottom of yesterday’s sell climax, which is at the 60 minute moving average. Yesterday was also a sell signal bar on the daily chart. Because of the 2 sided trading today, a breakout below yesterday’s low will probably be bought.
The bulls want to get above yesterday’s sell climax. Again, the early 2 sided trading make it likely that the breakout would not get too far. A trading range day is likely.
Bull flag candlestick pattern before the Brexit vote
S&P 500 Emini: Pre-Open Market Analysis
The Emini daily chart had a strong buy signal on Thursday. Yesterday gapped above Thursday’s high and therefore triggered the buy. Although yesterday sold off all day in a bear channel, it ended with a sell climax at support. The support was Thursday’s high and the 60 minute moving average. The channel on the 5 minute chart formed a bull flag candlestick pattern before the Brexit vote on Thursday.
A bear channel is a bull flag. There is a 75% chance of a breakout above the bear channel. As a result of yesterday’s sell climax, there is only a 25% chance that today will be a strong bear trend day. Furthermore, there is a 50% chance of follow-through selling in the 1st hour or two. In addition, there is a 75% chance of at least a 2 hour sideways to up move. It begins by the end of the 2nd hour. With the Globex session up 8 points, there will probably be a gap above the channel on the open. Because of the sell climax, the above statistics still apply.
As a result of the June 8 wedge top on the daily chart, bears expected a 2 legged correction. While Thursday’s micro double bottom might have been the 2 legs down, the channel was tight. A tight channel is usually the first of 2 larger legs. This means that the Emini might rally for 2 – 3 days and begin a 2nd leg.
Cash Index
Because the cash index got to within 14 points of its all-time high 2 weeks ago, it is within the high’s magnetic pull. The selling since then was not a strong bear breakout. The reversal up last week was strong. The Brexit vote has the potential to create a big move up or down. Consequently, there is a 50% chance that the cash index will test its all-time high. As a result, the Emini would then make a new all-time high. Most noteworthy, it would be a 3rd push up on the daily Emini chart.
A reversal down, which is likely, would then be from a wedge top. This could create a bear swing lasting at least a few weeks. If the selloff is strong, it could continue to the bottom of the 2 year trading range.
Brexit and a neutral market
Brexit is a breakout mode event. Therefore, wherever the Emini is just before the announcement. it will be at the market’s perception of balance. At that moment, the bulls and bears would have a 50% chance of a breakout on the news. Without Brexit, the odds would favor one more leg down. However, as a result of Brexit, the odds of a new all-time high are 50%. This is the same as the odds for the end leg down.
Forex: Best trading strategies
The EURUSD daily Forex chart had a higher low major trend reversal buy setup on Friday. Yesterday traded above Friday’s high and therefore triggered the buy signal. Because yesterday was a bear doji candlestick pattern on the daily chart, it was a weak entry bar. The bears see i as a sell signal bar for a lower high double top with the June 0 high.
The bulls see yesterday’s selloff on the 60 minute chart as a bear channel, Hence, it is a bull flag, and a pullback from Sunday’s bull breakout. Consequently, a breakout above the bear channel is likely.
Because the Brexit vote on Thursday is a major catalyst, all Forex markets will be neutral before the announcement. Hence, there will be a 50% chance of a bull breakout and a 50% chance of a bear breakout. Yesterday was mostly in a small trading range. Although there might be brief breakouts up or down before the vote, the odds favor quiet trading range price action.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today was a trading range day. The Emini is trying to be neutral going into the Brexit vote on Thursday. Hence, tomorrow will also likely have a lot of trading range price action. Logic favors the UK staying in the EU, but there is a chance that emotion and stupidity will win. There is a 50% chance of a sharp move up or down, regardless of the vote.
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.
Logic over emotion and stupidity every time! Here’s hoping
Al, today was just a great illustration of your simple BLSH Scalp mantra for TR days. Thank you so much for your course.
Can you guys please share the information with us
I am not in the chat room. My comment was based on what I learned in the video course and my personal trading yesterday.
Learned a lot today, thanks Al. in the hourly chart, there was a two legged up move as a pullback, a second leg down might be coming!
Please share the information with us about what Al teach you in the room .so we can learn too
E-mini 60 min inverted Head and Shoulder beginning Jun 13 and completing Jun 20?
Yes, you are right. LL MTR, then HL MTR for the R shoulder. I mentioned that either in the weekend update or last week. Still in middle of the TR, and that is overriding force. The market is waiting for the Brexit vote.