Emini Awaits Tax-Reform Vote, Budget Deal
I will update around 6:55 a.m.
Pre-Open Market Analysis
Yesterday traded below Friday’s low and then above Friday’s high. It was therefore an outside up day. While this is a sign of strong bulls, the Emini is still in the middle of a 4-week tight trading range. It is therefore just another leg in the range, and not a strong sign of buying.
The daily chart is still in a bull trend. Therefore the odds continue to favor at least slightly higher prices. Yet, there are extreme buy climaxes on the daily, weekly, and monthly charts. Consequently, the odds favor a 5% pullback beginning by the end of the year. It will probably begin with consecutive strong bear days. Without that, traders will continue to buy sell offs, confident that the Emini will continue to make new highs.
Overnight Emini Globex Trading
The bulls hope that the 3 week tight trading range is a bull flag. Seven of the past 8 days closed above their opens. As a result, the bulls will buy pullbacks, betting that today will again close above its open. However, the odds are against a big bull trend day because the Emini has been in a tight range for 3 weeks.
The Emini is down 5 points in the Globex session. Since it has been in a tight trading range for 3 weeks, the odds favor more sideways trading today. However, the past 4 days had bull bodies. That is unusual in a tight range. Hence, today will probably have a bear body. That means that today’s close will probably be below today’s open, and traders will be inclined to sell rallies.
Since the daily, weekly, and monthly charts are so extremely overbought, if today begins to trend down, traders should try to hold at least part of their position unless there is a clear bottom. This is because if a correction on the daily chart begins today, it will probably begin with a very big bear trend day.
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.