Emini S&P 500: 3-Day Exhaustion Gap Is Minor Trend Reversal
Al Brooks | Sep 18, 2018 01:57PM ET
By closing the gap above Wednesday’s high, the gap is now an exhaustion gap. Magnets below on the daily chart are the bull trend line, the 20-day EMA, and the January high.
However, an exhaustion gap is a minor reversal. The bears need follow-through selling today to increase the chances that last week’s rally was just a bull leg in a 3 week trading range.
The bulls need to form consecutive bull days. Without them, the 7 day rally will probably fail and lead to a bear leg in the 4 week trading range.
Since yesterday was a sell climax, there is only a 25 % chance of a strong bear trend day today. However, there is a 50% chance of some bear trend resumption in the 1st hour. Finally, there is a 75% chance of at least a couple hours of sideways to up trading starting by the end of the 2nd hour.
Since most days over the past several weeks have been mostly trading range days, today will likely be another mostly sideways day.
h3 Overnight Emini Globex Trading/h3
The Emini is up 7 points in the Globex session. It will therefore gap up on the open to around the 60 minute EMA. Furthermore, it will reverse about half of yesterday’s selling.
While it is still possible to have another bear trend day today, a big gap up after 3 sideways days makes that unlikely.
Yesterday’s big bear day reduces the chances of a strong bull day. That means a trading range day is most likely. This is especially true since most days over the past several weeks have spent the majority of their time in trading ranges. The Emini still has not yet decided whether the breakout above the January high will succeed or fail.
h3 Yesterday’s Setups/h3Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars. 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 in a position at the moment, these entries would be logical times for him to enter.
/h2
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