Yesterday broke above Monday’s big outside up doji bar, and made another new E-mini all-time high. But yesterday was a small bar on the daily chart, and it had a bear body. It is therefore a sell signal bar for today.
While the risk of a 10% correction is growing with the bull channel on the daily chart lasting a long time, traders will keep buying every 1- to 3- day pullback until there are consecutive big bear days. Then, they will look for a 2nd leg down and a 10% correction over 2- to 3- weeks.
The bulls want January to be the 3rd consecutive bull bar closing on its high on the monthly chart. If the E-mini simply goes sideways for the remainder of the week, they will have achieved their goal. Traders would then expect higher prices in February.
The bears want to undo some of the bullishness. They would like the month to close in the middle of its range, and preferably below the open. Traders would then look for sideways to down trading in February.
There is a FOMC announcement today at 11:00 pm PST. It can be a catalyst for a big move in either direction. This will be the first FOMC meeting with Biden as president. However, the Fed many months ago said it was not planning any changes in its policy for at least a couple years. That reduces the chance of any surprises, and of a big trend after the report.
With most days over the past two months having at least one swing up and one swing down, traders will expect that again today. However, day traders should exit their positions ahead of the FOMC report. There is usually a fast move up and down after the report. Traders should wait at least 10 minutes to see if a trend might be starting.
Overnight E-mini Globex trading
The E-mini is down 42 points in the Globex session. It will therefore break far below yesterday’s low, which will trigger the sell signal on the daily chart. It will also be far below the open of the week. Remember, the bears want a bear bar on the weekly chart.
Also, markets often change the appearance of bars just before they close. So far, January has been a big bull bar on the monthly chart. Therefore, there is an increased chance that the E-mini could sell off down to the open of the month by the end of this week.
Because the buy climax on the daily chart is extreme, there is an increased chance of big bear days coming at any time. When there is a big gap down, there is an increased chance of a trend day up or down. But if there is a trend, down is more likely.
Will today have both a swing up and a swing down today, like most days in January? We’ll see. If there is a series of strong trend bars up or down on the open, today will more likely be a trend day.
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. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.