Emini weak monthly buy signal bar ahead of May’s FOMC announcement
I will update again at the end of the day
Pre-Open market analysis
Yesterday was the final day in April. April was a bull bar on the monthly chart. However, it was a doji bar with a big tail on top. This makes it a weak buy signal bar. Consequently, the odds are against a big bull trend in May.
Today is the 1st trading day in May. Yesterday was outside down and it closed on its low. It therefore is a sell signal bar for today. However, the Emini is in the middle of a 3 month trading range. Furthermore, with tomorrow’s FOMC announcement, there is an increased chance that today will be a trading range day.
Yesterday’s low almost closed the small gap up from last Thursday. The odds are that today will close the gap. This means that today will probably trade below yesterdays low in the first hour.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex market. Since yesterday was a sell climax, the odds are that today will have at least a couple of hours of sideways to up trading that begins by the end of the 2nd hour.
The 2 hour trading range at the end of yesterday might be the final bear flag. Day traders will look for a reversal up in the 1st hour back into that range. Less likely, today will reverse all of yesterday and be a big bull trend day.
Look at the daily chart. Every big bull or bear trend day over the past 3 months has failed to get more than one day of strong follow-through. Most have had bad follow-through. This additionally reduces the chance of a consecutive big bear day today.
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 parabolic wedge sell climax
The EURUSD daily Forex chart has had 3 pushes down in a tight bear channel over the past week. This is a parabolic wedge sell climax. The odds therefore favor a bounce to the March 1 low over the next couple of weeks.
The EURUSD daily Forex chart broke strongly below a 4 month trading range. It is now pulling back below the September 8 high. That was the breakout point of the January rally.
Because the selloff over the past 6 days has 3 legs in a tight bear channel, it is a parabolic wedge. That is a sell climax. The odds are that it will lead to a test to near the March 1 low over the next couple of weeks.
Since the selloff on the daily chart is in a tight bear channel, the 1st reversal up will likely be minor. This is true even if it reaches the April 6 low. The odds are that it will fail and the selloff will at least test the current low.
The weekly chart is still in a bull trend. It is now below its 20 week EMA, which is support. That is an additional reason why the selling will probably pause soon.
The next major support is the January 9 low of 1.1915. The odds are that this selloff will get there, even if it first bounces 150 – 200 pips over the next few weeks.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 60 pips overnight. Since there were many small reversals over the past 5 hours, the bulls are beginning to buy with limit orders at new lows. They are scalping. In addition, the bears are now taking profits at new lows and selling rallies. This is a sign that the 5 minute chart will probably evolve into a trading range today or tomorrow.
Since the daily chart is in a parabolic wedge sell climax, the 5 minute chart will probably rally 100 – 150 pips over the next week. Therefore, if there is a clear bottom or strong reversal on the 5 minute chart, the bulls will be willing to hold for a 50 pip swing trade on the 5 minute chart.
However, the bear trend on the daily chart is strong. The bears will therefore sell rallies to prior lower highs on the 240 minute chart. The most recent one is yesterday’s high just below 1.2140.
But, the bulls need a strong bottom or a strong reversal up. Without that, the bears will sell every 30 pip bounce and the bulls will only scalp for 10 pips.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today reversed up from a wedge bottom.
Today was a bull trend reversal day. It is therefore a buy signal bar on the daily chart. However, the most important factor tomorrow is the 11 a.m. PST FOMC announcement. With a new Fed Chair, there is an increased chance of a big move up or down after the report.
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.
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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.
