Emini and Forex Trading Update:
Thursday May 6, 2021
Pre-Open market analysis of daily chart
- Yesterday was 8 consecutive bear days on the daily chart. That happens only once every few years, and it is therefore climactic.
- Since it is sideways instead of down, it is not a sell climax. It is simply a pattern that has lasted a long time and likely to end. Therefore, today or tomorrow will probably have at least a small bull body on daily chart.
- The bear bodies are a sign of repeated profit taking, but there has not been enough to create a reversal down.
- Tight trading range for 4 weeks so Breakout Mode.
- Since in a bull trend, higher prices are always at least slightly more likely than a strong reversal down.
- However, the yearlong rally has been extreme, so traders should expect a 10% correction this summer.
- On 60-minute chart, the 4-week trading range is a head and shoulders top. But a major top only has a 40% chance of leading to a bear trend. Sideways or up are slightly more likely.
Overnight Emini Globex trading on 5-minute chart
- Up 1 point in the Globex session so probably will open within yesterday’s range.
- If gaps down, gap will be small, and small gaps usually close in 1st hour.
- Trading range for 4 weeks, and most days have had at least one swing up and one swing down. Day traders will expect reversals again today.
- If there is a series of strong trend bars in the 1st hour, then might get strong trend day. Trading range day is more likely.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Turning up from 4-day micro wedge and double bottom bull flag (with April 22 low).
- After consecutive wedge tops, should get 2nd leg sideways to down, and it should start within a few days.
- Traders expect double top bear flag with May 3 high, or a double top with April 29 high.
- If bulls get breakout above April 29 high, still in 9-month trading range, which should continue for at least a couple more months.
- Traders will look for reversal down from wedge top (1st 2 legs up were March 18 high and April 29 highs), which would be a double top with the Feb 25 high.
- 2-day reversal up should reach May 3 high. Traders will then decide between double top bear flag, or continuing up to April 29 or February 25 high.
Overnight EURUSD Forex trading on 5-minute chart
- Strong breakout to far above yesterday’s high. Should reach magnet of May 3 high today or tomorrow.
- Overnight bull trend has been strong so day traders have only been buying.
- Near top of 4-day trading range, so bulls will start to take profits. Overnight rally should then evolve into trading range.
- Once there has been 20-pip pullback, day traders will expect a trading range, and they will begin to sell for scalps.
- Even if there is a trading range, the odds of a resumption up will be greater than of a reversal down, so easier to make money buying reversals up from bottom of range, than selling reversals down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- 1st bull day in 9 days.
- Reversed up from a wedge bottom and then a higher low major trend reversal.
- Rally was a Major Bull Surprise so increased chance of follow-through buying tomorrow, despite 4-week tight trading range.
- Rally stopped just below yesterday’s high, so Almost Outside Up Day.
- Reversed down to open of day in weak Small Pullback Bear Trend.
- Reversed up strongly at the end of the day to above yesterday’s high, making today an outside up day.
- If bulls get another strong bull day tomorrow, this could be the start of a new leg up over the next couple weeks.
- The bears want bad follow-through tomorrow, and for the week to close below the open of the week, so that this week would be a bear bar on the weekly chart.
- Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour.
- The most important weekly magnets are the open of the week and last week’s high, which was the all-time high.
- Last week’s low is also a target because last week was a sell signal bar. The bears want this week to close below last week’s low. They would prefer this week to close on the low of the week, but that is probably too far below.
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.
Thanks for the report Al. You are constantly mentioning the Friday weekly support / resistance with potential move toward the last trading hour of the week. Do you happen to have statistics how often such moves toward the last hour of weekly trading occure?
There are too many variables. It is important support and resistance and therefore I watch how the market responds when the market gets there.