Trump corporate tax cut weak Emini rally continuing, despite buy climax
Pre-Open market analysis
The Emini on Friday pulled back from Thursday’s big breakout above a 3 week bull flag. Yesterday went above Friday’s high and therefore triggered a buy signal on the daily chart. Yet, Friday had a bear body and was therefore a weak buy signal bar. Yesterday was a small day and, consequently, a weak entry bar. The daily chart is in a bull trend.
Last week was a pullback on the weekly chart. It is therefore a buy signal bar for this week. Since it was a doji and 3 of the past 4 week’s were dojis, it is not a strong buy setup. This reduces the odds of a strong rally from here on the weekly chart. Yet, the bulls want a break above last week’s high and then a new all-time high.
Even though the daily chart has been mostly sideways for a month, the odds continue to favor at least slightly higher prices. With Friday and yesterday both being small, and the holiday coming, the odds are against a big move up or down. Yet, a breakout to a new high or a strong reversal down can come at anytime. While unlikely today, traders will not be in denial if one happens. They will trade the strong breakout for a swing trade. More likely, today will be another mostly quiet, trading range day. I wrote this before the overnight rally.
Overnight Emini Globex trading
Yesterday was a entry bar for the bulls who see Friday as a pullback from Thursday’s bull breakout above a 6 day bull flag. The Emini is up 9 points in the Globex session. It will therefore probably gap up today. It may even gap above last week’s high, which would trigger a buy signal on the weekly chart. A big gap increases the chances of a strong trend day up or down. A big gap up makes a bull day more likely than a bear day. When there is a big gap up, the 5 minute chart is far above its 20 day EMA.
Many bulls do not want to buy too far above the average price. Consequently, a big gap usually leads to a trading range over the 1st hour or so. The bulls will try to create a double bottom or wedge bull flag on a sideways move to the moving average. The bears will try to create a double top or wedge top and then a bear trend day. Less likely, there will be a strong bull or bear trend that begins within the 1st few bars of the day.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.