Emini buy climax awaiting a catalyst, likely Trump related
Updated 6:47 a.m.
The Emini gapped to a new all-time high and above the measured move target on the daily chart. However, the 1st bar was a bear doji and traders have been selling new highs for 2 weeks. If the bulls get an early rally, it could form a parabolic wedge top. At the moment, the bars have been small. There is therefore no sense yet that the price is terribly wrong. This increases the chances of an early trading range.
If the bears get consecutive big bear bars, or 4 – 5 consecutive small bear bars, the odds will favor an early high of the day. The bulls want an opening reversal up from the support of yesterday’s high and the moving average. They need consecutive big bull bars closing on their highs.
At the moment, the Emini is Always In Short. The early selloff makes a bull trend day unlikely. There is still a chance of a reversal up, but unless it is strong, this open is more consistent with either a trading range day or a bear day. Traders are waiting for either strong momentum up or down or a double top or bottom before swing trading.
Pre-Open market analysis
Yesterday was a small day. When there is an unusually small day, there is an increased risk of a big day. In addition, there are buy climaxes on the daily, weekly, and monthly charts. Furthermore, the daily high is just 7 ticks below a major measured move target. The bulls will try again to get above that resistance today. Finally, the 8 day wedge on the daily chart after a very strong breakout increases the chances of a reversal down within the next few days.
Finally, a topping pattern
While the weekly and monthly charts have been overbought for many months, the bears needed either a credible topping pattern or a strong reversal down with follow-through selling. They have had neither, and the result is that the climax has continued to become more climactic. Well, now, they have a credible top on the daily chart. They next need the strong reversal down. They might get a breakout above the resistance, and then a reversal day or a 2 day reversal for a sell signal 1st.
Will it happen? The odds are always against traders picking reversals. However, if a strong reversal begins today, traders should try to swing part. This is because there is an increased chance of a big bear trend day in the next 2 weeks, and the range could be 30 points or more. Please read the last 2 sentences of the weekly update. They read, “In addition, a small wedge top at the end of a buy climax can be the start of that correction. As an example, look at the small wedge top on the weekly chart in March, 2004. That led to a 30 bar (week) trading range.”
What is most likely? After 8 quiet days, another quiet day is likely. There is a small chance of a big bull trend day. It one comes, traders should be ready for a reversal down late in the day or on the next day. The odds favor a sharp move down within 1 – 3 weeks.
Overnight Emini Globex trading
The Emini is up 4 points in the Globex market. It might therefore gapped up to a new all-time high. In addition, it might gap above the 2559.75 measured move target on the daily chart. The bulls want a strong breakout above that target. If they succeed, the next target is a measured move target on the weekly chart 20 points higher. The bears need a reversal down today or tomorrow to create a sell signal on the daily chart. They have a small wedge rally, which is a reasonable top after an extreme buy climax, but they need more. They need a sell signal and a strong reversal down. The next few days give them an opportunity. Since most reversals fail, the odds are against them. However, this is one of the best chances that they have had in several months.
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 EURUSD daily Forex chart sold off for 4 days after last week’s strong 2 day bull breakout. This is probably a pullback from that breakout. The odds favor a 2nd leg up.
The EURUSD Forex chart has been in a trading range for 3 months. While there is a lower high major trend reversal (head and shoulders top), most reversals fail. Therefore the odds favor at least a couple more weeks within the range.
The bulls have a double bottom with the August 17 low and a small wedge bottom from 2 weeks ago. The past 4 days are a pullback from the 2 day reversal up from those bottoms. The reversal was strong enough to make at least a small 2nd leg up likely. The minimum target is the October 12 lower high.
The bears want the 4 day pullback to accelerate and become a bear breakout below the 3 week small double top. They then need a strong breakout below the 3 month range. Since most breakouts fail, the trading range is more likely to continue.
Overnight EURUSD Forex trading
The 5 minute chart reversed up 35 pips over the past 4 hours. While the 4 day pullback retraced more than 50% of last week’s rally, the odds still favor a test of last week’s high, which is more than 100 pips above. Bulls will buy pullbacks, but they will take profits near last week’s high. Bears will sell there for 50 – 100 pips down. The 4 week trading range within the 3 month trading range will probably continue until the weekly chart gets closer to its 20 week exponential moving average. This means that any move up or down on the 5 minute chart over the next 2 weeks will probably not be more than 200 pips.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I will post the chart after the close.
The Emini reached a measured move target on the daily chart and stalled. While there is a 9 day tight wedge top and a buy climax, yesterday was not a strong sell signal bar. The bears need a strong reversal down before traders believe that a 100 point pullback has begun. Without that, the odds continue to favor at least slightly higher prices.
After 2 very small days, tomorrow will probably have a bigger range up, down, or in both directions.
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.
