Stock-Market Pullback Into Fed Rate Hike
Pre-Open Market Analysis
Yesterday's Emini reversed down from a small parabolic wedge on the open. The 60-minute chart has not touched the moving average in about 50 bars. Because that is unusual, it is unsustainable. It is therefore a buy climax. Most climaxes lead to trading ranges and not reversals.
Yesterday began to pull back after a buy climax. Tomorrow’s report has risk. As a result, the odds are that the 60-minute chart will reach its average price today. Furthermore, the bulls will probably be unable to create a strong rally after a buy climax going into the FOMC rate hike. Therefore, today will probably be sideways to down, and mostly a trading range day.
While a trend day can come at any time, a strong bull trend day is unlikely after a buy climax on the daily chart. If there is a strong trend day today, it will probably be down. Yet, the 1st reversal down after a buy climax is usually minor. Therefore, the bulls will probably buy the selloff. Because of Wednesday’s major announcement, the bulls will probably wait to buy until after the report.
Overnight Emini Globex
The Emini is up 7 points in the Globex market and is therefore testing the day session’s all-time high. Yet, yesterday had a reasonable buy climax, which usually leads to a 2nd leg sideways or down. Because tomorrow is a major catalyst for a big move up or down, this is another force that will tend to limit today’s range.
Yet, the recent daily ranges have been big enough for at least one swing up or down. Therefore, that will probably be the case today as well, despite the likelihood of a lot of trading range price action.