Day trading the July FOMC Report: Pre-Open Market Analysis
Yesterday was the 9th day in a tight trading range. Hence, the Emini is neutral going into today’s report. While the 1st few hours will probably behave like any other day, the FOMC report will change the price action. As I have been saying for 2 weeks, the upside is probably limited over the next 2 weeks, and there is a 60% chance of at least a 30 – 40 point correction.
The July rally is a Spike and Channel bull trend, and the pullback that began the channel was the July 6 low of 2065.75. Hence, traders have to be aware that the Emini might selloff all of the way down to that low.
FOMC report
Most FOMC reports lead to big moves. There is a 50% chance that the 1st move will quickly reverse. Therefore, most traders should not enter until at least after the close of the 2nd bar following the report (the close of the 11:10 a.m. PST bar).
In half of cases, the report leads to at least one swing that lasts at least 5 bars. The other half of days have trading range price action with multiple reversals and and briefer legs.
The bars are usually big. Hence, the market is moving fast and can quickly test multiple support and resistance levels. This reduces the time traders have to make decisions, and it increases the risk of making a mistake. Also, as a result of big bars, stops are far away. Traders therefore usually have to trade smaller positions to reduce this risk.
Globex Emini Session
The Emini is up 4 points in the Globex session, yet the range is only 5 points. This is a continuation of the intense breakout mode of the 9 day tight trading range.