Emini and Forex Trading Update:
Thursday March 19, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini finally broke below the December 2018 low yesterday. It also dipped below the open of January 20, 2017. That is the day Trump took office and therefore a magnet. The selloff has erased all of the stock market gains since he became president.
A reversal up from here would form an expanding triangle bottom with the February and December 2018 lows. But the month-long bear channel is tight and the bear trend is strong. Traders should only expect a bear rally. It could last several months and retrace more than half of the selloff, but it would still be a bear rally. The Emini will probably be in a trading range for several years.
There was some short covering late in the day yesterday and yesterday closed in the upper third of its range. It is a weak buy signal bar for today. The past 5 days formed a small wedge nested within a parabolic wedge sell climax. Yesterday had a bull body, but it did not close on its high. This is not a strong bottom, yet the market is very oversold. Traders expect a strong short covering rally soon.
However, the bear trend has been extremely strong. There might be one more plunge down to below 2000 before the bear rally begins.
Overnight Emini Globex trading
The Emini is down 35 points in the Globex session. It therefore will probably open within yesterday’s range. Everyone knows that the bears have huge profits and that they will probably begin to take some profits soon. That would lead to a rally, which means several bull trend days.
But traders also know that surprises to the downside are common in bear trends. They therefore know that the bears could get another big trend day.
What is most likely today? Every day for the past month has had at least one swing trade up or down that lasted at least a couple hours. Yesterday had two. Day traders will expect that pattern to continue. If a swing up or down is particularly strong, it could last all day.
Because of the strong rallies and selloffs, traders should be open to anything and look for swing trades today. Less likely, the Emini will form a small trading range day.
Yesterday’s 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. I rarely also show limit order entries and entries on the close of bars. Buyers of the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day.
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
The EURUSD Forex market has collapsed after a very strong rally on the daily chart. The break below the bottom of February’s strong rally ended the possibility of that surge being the start of a bull trend. Now, either the 2 year bear trend has resumed or the EURUSD is simply testing the bottom of its 8 month trading range.
The bulls will probably need at least a micro double bottom before they can get a 1 – 2 week rally. Consequently, traders will sell the 1st 1 – 3 day bounce.
It is interesting that the selloff finally closed the gap from 2017. The rally up at the February 20 low was a strong reversal up from just 1 pip above the bottom of that 2017 gap. Most gaps close. But when a market nearly closes a gap and reverses up strongly, then the gap is likely to stay open. Not here.
The bears want a measured move down based on the 700 pip height of the 8 month trading range. That would be a test of par (1.00). Furthermore, the EURUSD would be below the 2017 low. Traders would then conclude that the 2 year selloff was a bear trend and not just a protracted bull flag from the February 2018 high.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off strongly overnight. It fell below the major support of the February low. That low as the start of a strong reversal up from a successful test of a gap on the daily chart from 2017.
For the bears, it’s mission accomplished. They have no need for the EURUSD to go any lower today. However, they want the day to close below the February 20 low of 1.0878. They therefore will sell any rally to around that level. In addition, they would like the day to close near its low.
The bulls know that the bears want a close below support. They also know that the support is currently 60 pips above the current price. In addition, they understand that there is often a pullback to the breakout point. They therefore will be looking to buy a reversal up today.
Probably sideways to slightly up
The bear trend has been in a tight bear channel for 4 hours. A strong trend like that typically has to transition into a trading range before there is a significant rally.
Over the past hour, the 5 minute chart was in a triangle. There was a small bear breakout and then a small reversal up.
Is this the start of a 50 pip rally to the breakout point? It might be. At a minimum, it creates confusion. Consequently, either the bulls have begun a minor reversal up or the hour-long trading range will continue. In either case, the bulls will buy dips. After such a big selloff overnight, the best the bulls can probably do today is get a rally above the breakout point and convert the bear trend into a trading range.
Because the overnight trend was strong and this reversal up so far is minor, the bears will sell rallies. However, there is no incentive for them to sell at the low. They will probably switch to scalping from swing trading.
Traders should expect either a trading range for the rest of the day or a drift up to the breakout point on the 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. I rarely also show limit order entries and entries on the close of bars. Buyers of the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day.
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
By going above yesterday’s high, the Emini triggered a buy signal on the daily chart. There is a 5 day micro wedge bottom nested within a month-long parabolic wedge sell climax. But, the Emini pulled back and entered a trading range.
The bears want the buy signal to fail. They want the sell climax to continue down to below the 2000 Big Round Number.
However, if the bulls begin to get 2 or 3 big bull bars closing on their highs, then a 2 – 3 week short covering rally will likely be underway.
Tomorrow is Friday so weekly support and resistance are important. The bears want the week to close on its low and below the December 2017 low.
In contrast, the bulls want the week to close above the open. It would then be a reversal bar and it would have a bull body. That would increase the chance that a short covering rally might begin next week.
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.
It looks like the S&P has not had two higher closes in a row since February 12th so I guess that would be the first sign of a change in behavior.