Trump Emini rally awaiting government shutdown vote
Updated 6:55 a.m.
Yesterday was a bear bar and a sell signal bar for a wedge top on the daily chart. It was also a 2nd signal. Yet, the 5 day tight trading range reduces the odds of a successful reversal down today. Traders want to know if there are more buyers or sellers below yesterday’s low. Will the wedge top lead to a reversal down today, or will the tight trading range continue with the Emini forming an early low around yesterday’s low?
Tight trading ranges resist breaking out. Therefore, the odds are against a big bear trend. In addition, yesterday’s bear channel was tight. Consequently, the 1st reversal up will probably be minor. Hence, the bulls will probably need an early trading range and a double bottom before they can create a bull trend.
The odds are that the 1st breakout up or down will not get very far before reversing. This increases the chances of a trading range for the 1st hour or two. At the moment, the bulls are trying to reverse up from a double bottom with yesterday’s low. Yet, they do not have a strong rally. Also, traders want to see what is below yesterday’s low. Unless there is a strong reversal up soon, the odds favor a test below yesterday’s low. These early reversals in the 5 day range make a big trend day less likely.
Pre-Open market analysis
The Emini yesterday had a wedge top on the 5 minute chart, but the channel was tight. The bulls broke above and rallied above Wednesday high. Since Wednesday was a big bear day on the daily chart, it was a low probability buy signal bar. Therefore, there were more sellers than buyers above its high. The Emini then turned down and entered a trading range.
This week has been in a tight trading range, which increases the chances of another sideways day today. This is especially true because of the holiday and the upcoming congressional budget vote.
Overnight Emini Globex trading
The Emini is up 2 points in the Globex session. This is the last trading day before Christmas. Many institutions and traders will be distracted by the holiday. Consequently, today has an increased chance of being a small trading range day.
Since today is Friday, weekly support and resistance can be important. The week’s range has been small. Therefore, this week’s high, low, and open are are targets, as are last week’s high and close. Traders should look for a move toward one of these magnets in the final hour.
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 pulled back overnight after 4 consecutive bull trend bars. The momentum up is strong enough for at least one more leg up. That could create a wedge top. In addition, it would be a possible double top with the November high.
The EURUSD daily Forex chart rallied strongly in November and pulled back to a double bottom bull flag in December. The past 4 days were bull days. This is enough momentum to make one more leg up likely. If there is a rally over the next few days and it reverses, the rally would be a wedge top. In addition, it would be a double top with the November 27 top of the 2 month trading range. Since trading ranges resist breakouts, the odds are that there would be a pullback or a reversal at that point.
The U.S. budget vote is a major financial event. Consequently, there is an increased chance of a breakout out of the 2 month trading range in the next couple of weeks. When a market is in a trading range and there is a strong breakout, there is a 50% chance that it will reverse. In either case, the odds of a swing up or down of 500 pips or more are increasing. Traders need to see consecutive strong trend bars up or down to give them confidence that the swing is underway. Until then, they will continue to take quick profits and bet on reversals every few days.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart broke strongly below the 5 day bull channel overnight. However, it quickly reversed back up to around the bottom of the channel. The bears hope that the overnight tight trading range will be a lower high major trend reversal on the 5 minute chart. They need a strong selloff today for traders to believe that a bear trend is underway.
The tightness of the channel makes a bull flag more likely. This means that the rally will probably resume within a couple days and go up for about 100 more pips. At that point, the daily chart would be testing the November high at the top of the 2 month trading range. That is resistance. In addition, the rally would have 3 legs up on the daily chart and the bull channel would have a wedge shape. Since trading ranges resist breaking out, the odds would favor a reversal down from around 1.1950.
Alternatively, last night’s selloff could be the 1st leg down in a bear swing. However, the bears need strong follow-through selling over the next few days to make traders believe this less likely scenario.
The 5 minute chart has been in a 20 pip tight trading range for 12 hours. Most traders should not day trade until the range grows to at least 30 pips tall.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Today strongly reversed up 4 times in the 1st 2 hours.
The bulls had a double bottom, and then a wedge bottom. This is consecutive complex bottoms and therefore a good buy. The day remained a small trading range day.
Yesterday was a doji bar and therefore a bad sell signal bar. There were more likely buyers below. After 4 strong reversals up from at and below yesterday’s low, today had a small swing up. The day remained a small trading range day, and it is the 5th day in a tight trading range.
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.
