Limited resumption of the President Trump rally
Updated 6:48 a.m.
While the Emini gapped above yesterday’s high and broke to a new all-time high, the first bars were small. Furthermore, trend resumption up after a bear breakout below a protracted bull micro channel typically lasts 3 – 5 days. The odds are that the Emini will not go much higher before going sideways for 2 weeks into the FOMC meeting.
The Emini is Always In Long. Yet, the 1st bar was a bear doji. In addition, there has not yet been strong follow-through buying after the gap up. Because the bars are small and sideways, the odds are that the Emini will probably be another trading range day. While most days have been trading range days over the past 3 weeks, they have had swings up and down. As a result, that will probably be true today. The Emini is deciding on the direction of the 1st swing. Because there has been no strong buying above the all-time high, the Emini will probably have to trade down to find buyers.
There is an expanding top with yesterday. Because of the trading range open, the odds are that the Emini will close the gap above yesterday’s high.
The odds are against a strong trend day.
Pre-Open Market Analysis
The Emini had a 2 day pullback after a 12 bar bull micro channel. It therefore met the minimum expectation of a 1 – 3 day pullback. While it might go sideways to down for a day or two more, the odds still favor a new high within a week. Yet, once there is a new high after the 1st break below a bull micro channel, many bulls take profits. As a result, that new high often turns down from a micro double top. Furthermore, the Emini then usually evolves into a trading range for 5 – 10 bars.
While the Emini is strongly up and seasonally bullish, this Trump election rally has been unusually strong. Therefore bulls will probably use a new high to take some profits. Furthermore, the Emini will probably go sideways into the December 14 FOMC report.
End of the month
Because today is the last day of the month, the Emini might get drawn to monthly support or resistance. Support is at each of the highs of the past 3 months. Resistance is the top of the channel drawn across the November 2015 and August 2016 highs. That is around 2220.
Overnight Emini Globex trading
The Emini is up 5 points in the Globex session. It is therefore trying to resume the bull trend after a 2 day pullback from a 12 day tight bull channel. While the pullback might continue for another day or two, the odds still favor a 3 – 5 day rally, and then a tight trading range or pullback. That pullback will probably last about 10 days. It would therefore be a sign that the stock market is waiting for the December 14 FOMC Fed interest rate hike and statement before deciding on its next direction.
EURUSD Forex Market Trading Strategies
The daily EURUSD Forex chart has been in a trading range for 9 days. The bears see a bear flag. The bulls probably will need a test down and a major trend reversal before any significant rally.
The EURUSD has been in a trading range for 9 days after a sell climax test below the December 2015 low. Many bulls want another test of that level before they will buy.
While the 240 minute chart is trying to reverse up from a double bottom higher low major trend reversal, there have not yet been many strong bull bars. As a result, the 4 day rally might have to test down before going higher. Regardless of whether there is a test down, the odds are that the downside will be limited for a couple of weeks. Furthermore, the EURUSD will probably have a couple weeks of sideways to up trading. Targets are the lower highs on the 240 minute chart and possibly the bottom of the yearlong trading range at around 1.0800.
The bears want a breakout below the 18 month trading range. Since 80% of breakout attempts fail, the odds are that there will be at least a bounce before the bears try again.
Overnight EURUSD Forex sessions
The 60 minute EURUSD Forex chart reversed every hour overnight. This is therefore a reflection of the balance and confusion on the daily chart. There is no sign yet of the direction of the breakout. The bears had momentum, but the bulls have support at the December 2015 low.
Because the November selloff was so strong, the bulls will probably need one more test down to the December 2015 low before they will able able to have a significant rally. The bears need a strong break below that low. Because most trading range breakouts fail, the odds are that the 18 month trading range will continue. As a result, the EURUSD will probably base over the next several weeks and then work higher. The 1st important target is the breakout point of the November low.
Obviously the EURUSD will eventually break out of its 18 month range. Yet, betting on any one strong attempt is a low probability bet. Therefore, traders continue to take profits after days or a couple of weeks. With the 9 day range, many traders are taking profits after hours. Forex day traders are also mostly scalping.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini sold off from an expanding triangle top at a new all-time high. Yet, it reversed up strongly from a wedge bottom, expanding triangle bottom, the 2200 big round number, a Leg = Leg 2 target and a measured move target. The rally was just another high in a Broad Bear Channel.
The Emini today sold off from a new all-time high in a broad bear channel. Yet, it reversed up from several support levels. Furthermore, it is still in its 4 day trading range. While it might rally again to a new high over the next few days, it will probably soon go sideways for a couple of weeks.
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.
