Emini and Forex Trading Update:
Monday May 3, 2021
Pre-Open market analysis of daily chart
- Emini formed 5 consecutive bear doji bars in a tight trading range this week. This is a Breakout Mode pattern.
- Only 2 strong bull bars in past 11 days, even though strong bull trend in March and April.
- Streak of 13 bull bars that ended April 16 is probably an exhaustive move. Traders should expect a 10% correction to begin in May or June.
- Last week was a bear reversal bar, and therefore a sell signal bar for this week.
- The next couple of reversals down might fail, like all of the prior attempts. There might be one or two more new highs before a correction begins, but the Emini will probably not go much higher before there is a 10% correction. The correction should lead to a 2-month trading range.
- Picking a top is a low probability bet. There have been many tops since the pandemic low, and all failed. It is always more likely that a top will fail and that there will be another new high.
- But it is increasingly likely that there will be a 10% correction. Experienced traders can begin to scale into shorts, but they need to trade small and use a wide stops.
Overnight Emini Globex trading on 5-minute chart
- Up 14 points in the Globex session.
- 5 consecutive bear days in a bull trend is unusual. Today should close above the open and be a bull day on the daily chart.
- Bulls also want a close above Friday’s high, which would increase the chance that last week was just a bull flag. They would expect higher prices and a new all-time high this week.
- Bears hope last week will be a top. They need a close below the 5-day tight trading range. If they get a close on the low of the day, and far below last week’s low, traders will expect at least a couple legs sideways to down.
- 5 consecutive doji bars in a tight trading range is a Breakout Mode pattern. Traders are deciding if it is a bull flag or a top. There is an increased chance of a strong trend up or down.
Friday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Friday was big bear bar after consecutive parabolic wedge tops in the April rally. This is a Bear Surprise Bar, which usually will have at least a small 2nd leg down.
- Last week was bear sell signal bar on weekly chart, but after 3 strong bull bars, so minor sell signal.
- Consecutive small wedge tops in April, usually leads to a couple legs sideways to down.
- Bears want resumption of the January bear trend.
- More likely will get a couple legs sideways to down over the next couple weeks.
- April was a Small Pullback Bull Trend. 1st reversal down will probably be minor, but it could retrace about half of the rally and test 1.19.
- Bulls want today to be a bull bar closing near its high. Today would then be a buy signal bar for a failed bear breakout. Odds still favor 2nd leg sideways to down.
Overnight EURUSD Forex trading on 5-minute chart
- Fell below last week’s low, which triggered minor weekly sell signal.
- Reversed up overnight from just below last week’s low. This reduces chance of big bear day today.
- Overnight rally has been small and Friday was big bear day. This reduces chance of big bull day.
- Bulls want today to close above the open so that it will be a bull bar on the daily chart.
- Today would then be a buy signal bar for a failed bear breakout on Friday.
- Unless today is a big bull bar closing on its high, traders will expect a couple legs sideways to down for a couple weeks.
- That means a weak buy signal bar today would likely only lead to a 1- to 2-day bounce.
- Since today will probably not be a big trend day up or down, day traders will scalp in both directions.
- The open is the most important price. A close above the open, especially if today is a fairly big bull day on the daily chart, will increase the chance of higher prices tomorrow.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Gap up and formed triangle, so trading range open.
- Bear breakout and then test of 60-minute EMA (not shown).
- Trading range day.
- Since lower high and lower lows, it was also bear channel.
- Today was 6th consecutive bear bar on daily chart, which happens about once a year. A 7th bear day would be even more unusual, so increased chance of bull bar tomorrow.
- 6 bear days is relentless selling, and it is coming after the April streak of 13 consecutive bull days. Increased chance of correction soon.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Time
When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.