As I said was likely, yesterday rallied. The Emini was briefly oversold and many bears bought back their shorts. Yesterday is a buy signal bar for today.
However, the odds still favor a 2nd leg sideways to down to below 3200 within a couple weeks. Since 3300 was an important resistance level and then support level in January, this bounce is testing it. The odds still favor a 2nd leg sideways to down unless there is a strong break to a new high.
The month ends on Friday. I have been saying that the open of the month might be a magnet in the final hour on Friday, and that the Emini might oscillate around it until then. This is still the case. The bulls obviously want a 5th consecutive big bull bar on the monthly chart. But the bears want January to close on its low and become a strong sell signal bar. More likely, the Emini will close the month somewhere in the middle.
FOMC announcement today
There is an FOMC announcement today at 11 am PST. The Fed has led traders to believe that there would be no change in policy today. A surprise is unlikely. However, day traders should still be flat ahead of the report.
Also, they should wait for at least 10 minutes after the report before resuming trading. This is because there is usually a big move up and down within the 1st few minutes after the announcement. It usually takes at least 10 minutes before a trend will begin.
Even if the bulls get a rally up to the January high, the Emini will probably be sideways to down for at least a couple weeks. The upside is therefore limited.
But because the bull trend is so strong on the weekly and monthly chart, the downside is probably limited as well. With limited up and down, traders should expect that the 4 month buy climax will evolve into a trading range for at least a couple weeks.
Overnight Emini Globex trading
The Emini is up 7 points in the Globex session. It might gap above yesterday’s high. That would create a 2 day island bottom with Monday’s gap down. However, island tops and bottoms are minor reversal patterns. A gap up today is therefore not a major buy signal today.
I have been saying that the Emini might have to test 3300 before the bears can get a 2nd leg down. This rally is that test.
The Emini will probably not break strongly above or reverse strongly down ahead of today’s FOMC report. Also, while yesterday was a big bull day, it was mostly sideways for the final 4 hours. Day traders are expecting a lot of trading range trading ahead of the report because the rally is at resistance. This reduces the chance of a big trend up or down before the 11 am PST announcement.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. Buyers of the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day.
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
