Pre-Open market analysis
The Emini sold off after the FOMC announcement yesterday to below Tuesday’s low. It then rallied to above Tuesday’s high. Yesterday was therefore an outside up day. That is a sign of strong bulls. Because of the 4-week rally, the odds favor a new all-time high within a few weeks.
Yet, there is still a wedge rally and a double top on the daily chart. Also, the Emini is at the top of a 2-year trading range. Furthermore, the ledge top at 2940 on the weekly chart is a magnet below. Finally, most days over the past 3 weeks have had a lot of trading range price action on the 5 minute chart. Consequently, while the Emini is working higher, it is not racing up. Also, because of the loss of momentum at resistance, there can be a strong reversal down at any time.
Overnight Emini Globex Trading
The Emini is up 5 points in the Globex session. It therefore might gap above yesterday’s high. It is only 16 points below the all-time high. Therefore the bulls could easily make a new high today or tomorrow.However, until there is a breakout, the bears can get a strong reversal down from a double top with the July high on any day. But yesterday’s late rally was in a tight bull channel. Consequently, the Emini will probably have to transition into a trading range for at least an hour before the bears can begin a bear trend.As a result, the downside risk on the open is not great. The best the bears can probably get is a sharp pullback for an hour or so. However, if they get one, then they would have a better chance of a reversal down after a test back up.What is most likely? The all-time high is major resistance and it is therefore a magnet. There is plenty of room for a continuation of yesterday’s rally up to that high. Yesterday’s momentum up was strong.That makes an early bear trend unlikely. Therefore, the Emini will probably either have some resumption up on the open from yesterday or enter a trading range.Since yesterday’s rally was extreme, many bulls will look to take some profits early today. That increases the chance of a trading range beginning within the 1st 2 hours. If there is a trading range, the bears would then have a better chance of a swing down. At the moment, today will probably be mostly sideways or up.
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.