Emini and Forex Trading Update:
Wednesday April 14, 2021
Pre-Open market analysis of daily chart
- The Emini has now had its 13th consecutive bull day streak (13 bull trend days).
- The last time it had a streak of this duration was in February of 2011. That streak lasted 15 days.
- The 2011 streak reversed down 9% over the next few weeks, and the Emini had a 24% pullback in October 2011.
- Whatever happens this time will not be the same, but the important point is that when a buy climax is extreme, the bulls soon take profits. Also, the profit taking often lasts longer, and the pullback can be deeper than what traders expect.
- Another important point is that the current buy climax does not have to stop within the next few days. The Emini could form a brief pullback that could relieve some of the climax, and then the rally could resume for several more weeks. That is unlikely.
- There is also a 13-bar bull micro channel (every low of the past 12 days was above the low of the prior day).
- A lengthy micro channel means relentless, confident bulls.
- They normally will eagerly buy below yesterday’s low once they get the chance.
- However, because this rally is so extreme, the bulls might instead sell out of longs in a panic, and not buy below yesterday’s low.
- Day traders are buying every intraday selloff, because each was followed by a new high. However, the streak on the daily chart is more extreme than any other in the past 10 years. There is therefore an increased risk of a sharp pullback coming at any time.
Overnight Emini Globex trading on 5-minute chart
- The Emini is down 4 points in the Globex session.
- Since extreme buy climax on daily chart, increased chance of big trend day up or down. The bulls might get a blow-off top, and the bears might get start of 2-week selloff.
- Most days over past 6 days were mostly trading range days, but rallied at the end of the day. Day traders will continue to expect this until something else happens.
- If series of strong trend bars up or down in 1st hour, then increased chance of strong trend day.
Yesterday’s Emini setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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 currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Strong rally from wedge bottom. Bulls want strong break above March 18 lower high, and then a test of the February 25 lower high.
- Strong break above March 18 lower high, would convert 3-month bear trend into a big trading range, and not necessarily a bull trend.
- 3 legs up in tight bull channel is parabolic wedge, which usually will attract profit takers.
- Wedge rally to double top in bear trend that began in January. Bears want reversal down, and break below March low, which is neckline of double top.
- Probably will turn down soon for about a week, and form a higher low after the 2-month wedge bottom. Should then get 2nd leg up.
- Trading range that began on March 9 will probably continue for at least another month.
Overnight EURUSD Forex trading on 5-minute chart
- ii on daily chart 2 days ago, is a possible Final Bull Flag. It is a magnet below. Usually a breakout above an ii Final Bull Flag reverses down within a few days, but might have to reach March 18 high first.
- Bulls want big rally today to above March 18 high, but big bull day unlikely after ii 2 days ago, and mostly trading range trading for 6 days.
- Broke above yesterday’s high, but mostly sideways in small range overnight.
- Day traders are scalping up and down. Most of trading for 6 days has been within trading ranges.
- March 18 high is a magnet above, but rally on daily chart is near enough for double top reversal down to begin at any time.
- Big bear day unlikely since tight bull channel on daily chart.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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 currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
- Finally, a bear day on the daily chart after 13 consecutive bull days.
- There was a rally to a new all-time high on the open, but then a reversal down from a wedge top and a head and shoulders top. The Emini then entered a trading range, which was also a triangle. It was a continuation of the range from the last hour of yesterday.
- It broke below a lower high major. This was also a small head and shoulders top. Since it was the right shoulder of a bigger head and shoulders top, it was a nested pattern.
- The big bear breakout reversed up from just above yesterday’s low. At that point, today was an Almost Outside Down Day.
- The reversal failed and today became an outside down day.
- Today closed back above yesterday’s low.
- If tomorrow is also a big bear day, this will likely be the start of a 5- to 10% correction.
- If not, there will probably soon be at least a small new high. However, the Emini will probably not get much above 4,200 before correcting at least 10%. April or May will likely be the high for several months, and possibly for the year.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
Hi, Al. Would you mind to elaborate how can you come to the conclusion that April or May will likely be the high for several months, and possibly for the year? This conclusion seems very insightful
Some simple math factors into this. Every year has a high and a low. May will be the 5th month, and the high is not yet it. The odds on January 1 of any month being the high for the year are 1 in 12. In May, the odds will be much greater (1 in 8).
We now have the most extreme buy climax in a decade. That typically attracts profit taking, and the profit taking usually lasts much longer than from a typical top. Look back at the streak of 15 bull bars in February 2011. There was a pullback and then a minor new high, and that remained the high for the year.
If the top is in late May and the market meanders down into September or October, which it often does, it might not have enough time to get back to the May high.
At the moment, there is plenty of time left. Unless there is a 20% or more pullback this summer, the market will probably make a new high later in the year.