Emini island top and weekly sell signal before FOMC
I will update around 6:45 a.m.
By trading below last week’s low, yesterday triggered a weekly sell signal. Furthermore, by gapping down, yesterday created a 6 day island top on the daily chart. Finally, yesterday was a big bear trend day.
Since the daily chart is in a trading range, an island top is not a strong sign of lower prices. In fact, the odds are that the weekly gap down will close this week, even with the uncertainty of tomorrow’s FOMC report. In addition, there is a 40% chance of a gap up within a couple of weeks that will create an island bottom on the daily chart with today’s gap down.
While yesterday was a big bear day, it might have been a sell vacuum test of the 2700 Big Round Number and the March 7 higher low. This is more likely because there was a late rally that retraced half of the selloff. In addition, it was the 6th consecutive bear day. That has not happened in over a year. Therefore, the odds favor a bull bar on the daily chart today.
The bears want follow-through today to prove that the 5 day selloff is a bear trend and not a pullback in a rally. But, the Emini might wait for Wednesday’s FOMC report, which can lead to a sharp selloff or a strong reversal up.
Pre-Open market analysis
The Emini is up 3 points in the Globex market. Since 6 consecutive bear days rarely happens, the odds are that today will close above the open. Hence, if today is within about 5 points of the open in the final hour, it will probably get drawn there for a test. Unlike Friday’s test, today will probably close above the open.
Yesterday’s gap down will probably close within a couple of week’s. It might close after tomorrow’s FOMC announcement. As strong as the bears were yesterday, the selloff was still in the middle of a 2 month trading range. Also, the odds are that April will test the all-time high. Therefore, the bears need strong follow-through selling this week before traders believe that the selloff is the start of a test down to the February low. More likely, the Emini will reverse up within a couple of weeks and begin a move up to the all-time high.
Overnight Emini Globex trading
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.