I will update around 6:55 a.m.
Monday was a sell signal bar on the daily chart. When yesterday traded below Monday’s low, it triggered the sell. Since the daily, weekly, and monthly charts are in extreme buy climaxes, traders need to be ready for a big reversal down coming at any time. However, until there are consecutive strong bear bars on the daily chart, the odds continue to slightly favor higher prices. Since this setup looks particularly good for the bears, it has a better chance of success than all of the other sell signals this year.
Today is important because if it is a 3rd consecutive bear day, the odds will favor at least a 2nd leg down. If that happens, there will probably be sellers above today’s high. Consequently, today’s close is important. This increases the odds of a swing up or down at the end of the day. The bears want today to close below the open to create a 3rd bear day. Therefore, they will try to create a selloff in the final hour if the Emini is above the open. The bulls want the opposite. They will buy at the end of the day if the Emini is about 5 points or less below the open.
Because Friday’s budget vote is a major catalyst, the Emini has an increased chance of being in a tight range until after the vote. Yet, traders always have to be ready for a breakout.
The Emini is down 2 points in the Globex market. Since yesterday was a sell climax, there is a 50% chance of follow-through selling in the 1st 2 hours. In addition, there is a 75% chance of at least 2 hours of sideways to up trading that starts by the end of the 2nd hour.
Because there have been big swings up and down this week, that will probably continue again today. However, the swings will get smaller and the 5-minute chart will probably enter a trading range before Friday’s budget reconciliation vote. That is a major catalyst and it can therefore lead to a big move up or down.
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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