Posted 7:15 a.m.
The daily chart has a 9 bar bull micro channel and is therefore overbought. It is also at the top of the 6 month trading range, which is resistance. There were no bull bodies in the first 4 bars, and the Emini was Always In Short from the 2nd bar. The odds favor a pullback today or tomorrow. However, the bears need to do more before traders will believe that today will be a bear trend day. The bulls are still hoping for an opening reversal up from the 5 or 15 minute moving averages.
At the moment, the Emini is Always In Short and the context is good for a 1 – 2 day pullback. Yesterday’s range was small and today reversed down from above yesterday’s high. The bears might get an outside down day today. However, the bears have not had good follow-through, and this increases the chances of trading range trading, which was so common last week.
The bulls need a strong bull breakout with follow-through to reverse the Emini to Always In Long. Without that, the best they will probably get is a trading range. The selling has not been strong enough yet to make a bear trend day likely, even though there has been a bear swing on the open.
My thoughts before the open: The Candlestick pattern is a double top, but there might be a bull breakout this week
The Globex market was in a tight trading range overnight. Most of the trading for the past week has been in tight trading ranges, but the last 5 days all closed above their midpoints and the Emini is now testing the all-time high. It is only about 6 points above the current Globex price and it can easily be reached today. It is clearly an important magnet after being in a 6 month tight trading range.
However, there have been many strong tests of top and bottom of the range and every one has failed. It is possible that this one will form a double top with the June high or the all-time high (May high), and reverse down. The candlestick pattern is a double top unless the bulls get their breakout. Since this is the strongest rally in the past 6 months, the bulls have a good chance this time.
Most reversals down have required at least a micro double top. This means that if the Emini does reverse down today or tomorrow, it will probably be bought and it will have to test back up one more time before it can trade down to the bottom or middle of the 6 month trading range. Traders will look to buy a pullback this week, even if it is strong.
The 60 minute chart is in a tight channel and the channel has gone on for about 50 bars. It is a series of consecutive buy climaxes and it will probably correct sideways to down today or tomorrow. Since the Emini has been in its trading range for such a long time on the daily chart (over 100 bars), the odds are that it will break out soon.
However, even if it successfully gets a bull breakout, it will probably be limited because the monthly chart is so overbought. There is still an 80% chance of a test down to the monthly moving average this year, which is 10% lower, even if there is a 10% rally first.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had an opening reversal up from the 15 minute moving average. It failed at the all-time high, but closed at a new all-time high close by 3 ticks.
The 60 minute chart is overbought and the daily chart has a 9 bar bull micro channel. The odds are that the Emini will pullback tomorrow or Wednesday, but that the pullback will be bought. The bears will probably need at least a micro double top on the daily chart before they can turn the Emini back down. Even then, there might be follow-through buying for several weeks after a breakout above a 6 month trading range. Whether or not there is, the Emini still has an 80% chance of at least a 10% correction over the remaining 5 months of the year.
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There were no big moves overnight. The USDCAD is overbought on the daily chart, and the AUDUSD is oversold, and both are related to crude oil. There is no clear reversal yet in either on the 60 minute and 5 minute charts.
The EURUSD daily chart is deciding on whether it will form a double bottom higher low major trend reversal with the May low, or instead fall to the April low. The 60 minute chart is in a tight bear channel that has had several sell climaxes, which means that it will try to reverse soon on the 5 and 60 minute chart for a swing up. There is no bottom yet.
The EURGBP on the daily chart is oversold and it is in a spike and channel bear trend on the 60 minute chart. The odds are that there will be a 50 – 100 pip swing up on the 5 minute chart today or tomorrow.
The 60 minute chart of the USDJPY is in a spike and channel bull trend, based on the July 13 spike. The odds are that it will trade down soon to test the bottom of the channel around 100 pips below, but there is no top yet and the bull channel is continuing. However, it has gone on for about 100 bars, which is a long time, and the odds are that it will correct down soon.
Online daytraders who are trading Forex markets for a living will watch for strong breakouts with follow-through in all markets up or down today before they will swing trade. Until there is a strong breakout, Forex trading for beginners will be more difficult, and most traders will scalp.
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.
