After Monday triggered the yearly buy signal by going above last year’s high (an outside up candlestick), it immediately reversed down. This often happens with higher time frame signals. When a buy signal bar is big, many bulls do not want to risk to below the bottom of the buy signal bar. Therefore, there is a relative lack of buyers above the buy signal bar, and the chart often quickly reverses down after triggering the buy signal. However, the bulls who did not buy often buy a sharp selloff, like they did yesterday.
Half of the time, the E-mini rallies again and triggers the signal a 2nd time, which it did yesterday. Yesterday also triggered the OO (outside-outside) buy signal on the daily chart. But an OO late in a bull trend frequently becomes the Final Bull Flag. There is an increased chance of a reversal down within about 5 days.
Yesterday’s E-mini climactic test rally was extremely strong, but there was a late reversal down. The bears are hoping that yesterday formed a double top with Monday’s high. It is important to note that the 2nd leg up in a double top is sometimes an extreme buy climax, like yesterday. However, the selloff was weak and it is more likely a bull flag.
As I have been discussing over the past month, there are issues with the daily, weekly, and monthly charts that make a pullback to 3500 likely to begin this month. Therefore, the E-mini will probably not go much higher before pulling back. It sometimes will go sideways for many days at a key price, before breaking out in either direction. That might happen here.
Overnight E-mini Globex trading
The E-mini is up 20 points in the Globex session. The bulls hope that yesterday’s late selloff was just a bull flag.
Today will gap above the top of yesterday’s bear channel. The bulls want the rally to resume and for the E-mini to close at the high of the week tomorrow.
At the moment, it is going sideways around the high and close of last year, and the open of the week.
This might continue through the end of the week. Because yesterday’s reversal up was so strong, there is an increased chance of trend resumption up today. However, because the E-mini might be stuck at those magnets, it is slightly more likely that the week will end around here when it closes tomorrow.
So far the week is a big outside doji bar on the weekly chart. That is neutral and it increases the chance of the sideways trading continuing through tomorrow. However, the swings up and down have been big. Day traders will expect at least one leg up and one leg down again to day, like over the past several days.
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.