Emini buy climax pausing before Trump’s tax cut vote
Uppdated 6:48 a.m.
The bulls gapped above yesterday’s high and the 60 minute 20 bar EMA, but the 2nd bar was a strong bear bar. This is consistent with all of the reversals over the past 3 weeks. In addition, it lowers the chances of a big bull trend day. The strong bull bar and the gap above the 20 bar 60 minute EMA reduce the chances of a big bear day, especially after the reversal up from the bottom of the 3 week range.
The 4 bar tight trading range increases the chances of a lot of trading range trading today. While a big trend day is always possible, traders will need consecutive big trend bars up or down to change this early trading range start to the day.
Support below is at the 60 minute 20 bar EMA and yesterday’s high, and then yesterday’s close. Resistance above it at Monday’s major lower high. These levels could be the borders of the trading range, if today is a trading range day.
Pre-Open market analysis
Five of the past 6 days gapped down, but all reversed up. It is unusual for a bull trend to gap down on 5 of 6 days. Therefore, the bull trend is weakening. Everyone is aware of how extreme the buy climaxes are on the daily, weekly, and monthly charts. Yet, bulls keep buying every selloff. They correctly assume that most reversals will fail and this is a profitable strategy. Even if they finally lose on one of their buys, they will have made so much money on all of their other buys to make the strategy profitable.
Yesterday triggered a sell signal on the weekly chart buy falling below last week’s low. However, yesterday was not a big bear trend day. Hence, it was a weak entry bar for the bears. The bears need consecutive big bear bars soon to make traders believe that they have taken control. Without that, the 4 week trading range will continue. In addition, the Emini will probably trade at least a little higher.
Yesterday was the 1st close below the 20 day EMA in 3 months. In addition, the bears could only get a small bear body on the daily chart. In addition, yesterday closed above last week’s low after triggering a weekly sell signal. Finally, the Emini is at the bottom of a 3 week trading range, and most breakout attempts fail. The odds therefore favor a bounce today or soon.
Overnight Emini Globex trading
The Globex is up 8 points in the Globex session. The bulls want a strong reversal up from below the 3 week trading range and last week’s low. Yet, the trading range is tight. Consequently, both bulls and bears will be disappointed. Therefore, even if the bulls get a rally today, the follow=through will probably be bad.
Since the Emini has been in a tight range for 3 weeks and most days have had at least one leg up and down, today will probably also have at least one leg up and down. When that is the case, there is often a trading range for the 1st hour as the market decides on the direction of the 1st leg.
Buy signal on daily chart
A big trend day up or down can come at any time. However, the context makes continued trading range trading more likely. Since yesterday closed above its open, it is a buy signal bar on the daily chart for a failed breakout below the 3 week range and 20 day EMA. But, it was a bear doji. This is a weak buy signal bar.
The Globex market is just above yesterday’s high on the day session chart. Consequently, today will probably trade above yesterday’s high. This will therefore trigger a buy signal on the daily chart. While this increases the odds of a bull trend today, the weak buy signal and the 3 week trading range make a big bull trend day less likely. In addition, the reversal up from support makes a bear trend day unlikely.
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 yesterday reversed down after Tuesday’s buy vacuum test of the top of the October 26 sell climax. It was also a double top lower high in a 3 month bear channel. The bulls see today as part of a pullback from a strong reversal up from a breakout below a 4 month trading range.
The EURUSD daily Forex chart yesterday reversed down from just above the October 26 sell climax high. In addition, yesterday was a sell signal bar for a double top lower high with the October 12 major lower high. The bears want Tuesday’s rally to be just a buy vacuum test of a lower high in a 3 month broad bear channel. On the 240 minute chart (not shown), the bears want Tuesday to be a 2nd Leg Trap in a bear channel.
Yet, the reversal up took place at the 20 week EMA, and the weekly chart is in a strong bull trend. Therefore, rather than a 2nd leg trap on the 240 minute chart. Tuesday’s rally is more likely the 1st of 2 legs sideways to up on the daily chart. This means that the bulls will buy a 1 – 5 day selloff. They correctly believe that a higher low and at least a small leg sideways to up is likely.
Since the rally put the daily chart back in the October trading range, and a pullback and then at least a small rally is likely, the daily chart will probably be sideways for at least several more days. In addition, the 4 month trading range will probably continue for at least several more weeks.
Overnight EURUSD Forex trading
The 5 minute EURUSD chart sold off 100 pips from yesterday’s high. If the 6 day rally is just a 2nd leg trap, the daily chart will likely begin an endless pullback. That means 3 or more consecutive bear trend bars on the daily chart. Since a bull flag is more likely, the bulls will begin to buy again today or tomorrow. However, the rally stalled at important resistance, and reversed down strongly since yesterday’s high.
Because that created a 3 day Big Up, Big Down pattern, it generates Big Confusion. Since confusion is a hallmark of a trading range, the 5 minute chart will probably begin to form a 100 – 150 pip tall trading range. Therefore, bulls will buy selloffs and look for 30 – 50 pip bounces, and bears will sell rallies and scalp. Day traders will probably be forced to scalp for 10 – 20 pips for several days.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini gapped above yesterday’s high to trigger a buy signal on the daily chart. After a High 2 bull flag, the Emini rallied in a small pullback bull trend. It was sideways for the 2nd half of the day.
By trading above yesterday’s high, the Emini triggered a buy signal on the daily chart. While today was a strong bull trend, it is still within a month-long tight trading range. The bulls need a strong breakout above the all-time high. This means that tomorrow is important. It will tell traders whether the yearlong bull trend is resuming or the trading range is continuing.
Because reversals are common in trading ranges, there is an increased risk of a bear day tomorrow. If the bull trend is resuming, the bulls will begin to get a series of consecutive bull trend days. Without that, the odds favor another bull leg in the trading range. This means that it would lead to a bear leg and more trading range trading.
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.
