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The Emini yesterday formed a trading range day. By closing above the open, it ended a 6 day streak of consecutive bear closes. It was also a bull inside day and therefore a buy signal bar. However, after 6 bear days, most bulls will not buy a breakout above yesterday’s high until after the 11 a.m. PST FOMC report. Because there is a new Fed Chairman and the Fed’s policy is changing this year, there is an increased chance of a big move up or down after the report.
The market usually gets neutral before a big news event. That reduces the odds of a big move prior to today’s report.
The Emini is down 4 points in the Globex market. Yesterday was a trading range after a strong, late rally on Monday. It is therefore a bull flag. Hence, if there is a breakout before the report, it is more likely to be up than down. Since yesterday had a small range, the odds are that today will trade above its high, below its low, or both. At least one of the breakouts will probably come this morning.
Day traders will trade like on any other day until around 10:30 a.m PST. Many will then stop day trading and wait for the 11 a.m. announcement. A breakout after the FOMC report is usually big. It has a 50% chance of reversing within minutes. Most day traders should wait at least 10 minutes after the report before resuming trading.
Prior to 2 years ago, a trend after an FOMC announcement often lasted for the remainder of the day. Recent reports have more often led to trading ranges. Many have had brief big breakouts up or down after 12:30 p.m. If there is a trading range, day traders should watch for a late Buy The Close or Sell The Close trend.
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.
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